LSL Property Services plc Annual Report 2016

FY2016 Annual Report · LSL Property Services plc

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www.lslps.co.uk
Registered in England
(Company Number 5114014)
Registered Office:
Newcastle House
Albany Court
Newcastle Business Park
Newcastle upon Tyne
NE4 7YB
Tel: 020 3215 1015
Fax: 020 7920 9443
Email: enquiries@lslps.co.uk

LSL Property Services plc

Annual Report and Accounts Year ended 31st December 2016

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Annual Report and Accounts 2016

LSL Property Services plc, a leading
provider of residential property
services to its key customer groups
incorporating both estate agency and
surveying businesses.

Forward Looking Statements
This Report may contain forward looking statements with respect
to certain plans and current goals and expectations relating to the
future ﬁ nancial condition, business performance and results of
LSL. By their nature, all forward looking statements involve risk and
uncertainty because they relate to future events and circumstances
that are beyond the control of LSL including, amongst other things,
UK domestic and global economic and business conditions, market
related risks such as ﬂ uctuations in interest rates, inﬂ ation, deﬂ ation,
the impact of competition, changes in customer preferences, delays
in implementing proposals, the timing, impact and other uncertainties
of future acquisitions or other combinations within relevant industries,
the policies and actions of regulatory authorities, the impact of tax
or other legislation and other regulations in the UK. As a result LSL’s
actual future condition, business performance and results may diﬀ er
materially from the plans, goals and expectations expressed or
implied in these forward looking statements. Nothing in this Report
should be construed as a proﬁ t forecast. Information about the
management of the Principal Risks and Uncertainties facing LSL is
set out within the Strategic Report on pages 22 to 25.

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Contents

Overview, Strategic Report and Directors’ Report

Overview
1 Highlights 2016
2
LSL Today
4 Milestones
5 Chairman’s Statement
8

Group Chief Executive’s Review

Strategic Report

12 Strategy
13 Business Model
14 Markets
16 Business Review – Estate Agency Division
19 Business Review – Surveying Division
20 Financial Review
22 Principal Risks and Uncertainties
26 Corporate Social Responsibility
32 The Board

Directors’ Report (including Corporate
Governance Reports)
Statement of Directors’ Responsibilities in Relation to
the Group Financial Statements
Report of the Directors
Corporate Governance Report
Audit Committee Report
Directors’ Remuneration Report

36
40
46
54

Financial Statements
78

Independent Auditor’s Report to the Members of
LSL Property Services plc
87 Group Income Statement
88 Group Statement of Comprehensive Income
89 Group Balance Sheet
90 Group Statement of Cash-Flows
92 Group Statement of Changes in Equity
93 Notes to the Group Financial Statements
139 Statement of Directors’ Responsibilities in Relation to

the Parent Company Financial Statements

140 Parent Company Balance Sheet
141 Parent Company Statement of Cash Flow
142 Parent Company Statement of Changes in Equity
143 Notes to the Parent Company Financial Statements

Other Information
155 Deﬁ nitions
159 Shareholder Information

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Highlights 2016
A solid performance in a changing market

Group

£307.8m

Group revenue
(2015: £300.6m)

£63.5m

Profi t before tax
(2015: £38.6m)

£34.6m

Group Underlying
Operating Profi t
(2015: £42.9m)

25.9p

Adjusted Basic
Earnings Per Share
(2015: 31.5p)

11.3%

Group Underlying
Operating Margin
(2015: 14.3%)

10.3p

Full year dividend
per Share
(2015: 12.6p)

£32.2m

Exceptional gain/(cost)
(2015: (£0.3m))

Estate Agency and Related Services

Surveying and Valuation Services

£24.5m

Underlying Operating Profi t
(2015: £31.3m)

£17.5m

Underlying Operating Profi t
(2015: £18.1m)

Group revenue – £m

Group Underlying Operating Profi t1 – £m

Group Underlying Operating Margin – %

Group operating profi t – £m

Profi t before tax – £m

Exceptional gain/(cost) – £m

Basic Earnings Per Share (EPS) – pence

Adjusted Basic Earnings Per Share (EPS) – pence2

Net Bank Debt3 at 31st December – £m

Final proposed dividend per Share – pence

Full year dividend per Share – pence

2016

2015 % Change

307.8

300.6

34.6

11.3

65.4

63.5

32.2

49.2

25.9

20.3

6.3

10.3

42.9

14.3

41.4

38.6

(0.3)

29.7

31.5

39.9

8.6

12.6

-19

+58

+65

+66

-18

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Notes:
1 Group Underlying Operating Profi t is before exceptional costs, contingent consideration, amortisation of intangible assets and share-based payments (as defi ned in Note 5)
2 Refer to Note 11 for the calculation
3 Refer to Note 31 for the calculation

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LSL Today
LSL has established leading positions in its market segments

LSL is a leading provider of residential property services to its key customer groups. Services to consumers include:
residential sales, lettings, surveying, conveyancing and mortgages, pure protection and general insurance brokerage services.
Services to mortgage lenders include: valuations and panel management services, asset management and
property management services.

Estate Agency Division – Estate Agency and Related Services

Residential Sales and Lettings

LSL is one of the largest estate agency networks in the UK1. It has strong established high street brands including Your Move, the largest UK single
brand estate agent1, and Marsh & Parsons which brings exposure to the prime and outer Central London property markets. Branch services
include Residential Sales Lettings and Financial Services and a successful franchise model which operates in 107 branches across predominantly
Your Move and Reeds Rains. All Estate Agency brands are members of The Property Ombudsman (TPO) Redress Scheme, which operates a
residential sales and lettings code of practice approved by the Trading Standards Institute (TSI) under its Consumer Codes Approval Scheme
(CCAS). The Financial Services businesses are subject to the Financial Ombudsman Service and also contribute to the funding of the Financial
Services Compensation Scheme through regulatory fees and charges.

Your Move
The largest UK single branded estate agent1 with 267 branches
operating throughout the UK and the most visited UK estate
agency website3 with over 11.7 million visits in 20164.

www.your-move.co.uk

Reeds Rains
A predominantly northern based network of 157 branches
with the highest brand awareness of any estate agent brand
in the North East, the North West and Yorkshire2.

www.reedsrains.co.uk

Marsh & Parsons
Leading London premium brand estate agency operating
in the prime Central, North West, West and South West
London property markets out of 25 branches.

www.marshandparsons.co.uk

LSL Land & New Homes
LSL Land & New Homes, through the Estate Agency
businesses provides a complete range of services for
house builders, developers and investors of all sizes.

www.lsllandandnewhomes.co.uk

Group First: Mortgages First and Insurance First Brokers
Group First, which was acquired in 2016, provides mortgage and
protection brokerage services to purchasers of new homes through
its subsidiaries: Mortgages First and Insurance Brokers First.

www.mortgages-fi rst.co.uk www.insurance-fi rst.co.uk

N E W H O M E S

LSLi
LSLi is the holding company and fi nancial services provider for nine
estate agency brands with a network of 65 branches. The brands
in the LSLi network are based predominantly in and around Greater
London and the Home Counties.

www.lsli.co.uk

LSL AR 2016_Sect1-3 B&C.indd 2

Asset Management

LSL’s asset management companies
are market leaders in the sale of
residential properties on behalf
of corporate clients. In 2016 they
managed 2,556 repossessions
utilising a network of up to 1,471
estate agency branches nationwide.

Templeton LPA
Law of Property Act fi xed charge
receiver joined the Group in
2010.

www.templetonlpa.co.uk

LSL Corporate Client
Department
LSL CCD operates a repossessions
asset management business and
a property management business
for multi-property landlords and
is a leading property specialist,
providing services to national and
global institutions.

www.lsl-ccd.co.uk

St Trinity Asset Management
The Group’s second asset
management business was
created in 2010 and specialises
in repossession property sales as
well as off ering a range of other
services including part exchanged
property sales, bulk property
disposal, auction sales, property
relocations and conveyancing.

www.sttrinityasset
management.co.uk

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N E W H O M E S
N E W H O M E S

Estate Agency Division – Estate Agency and Related Services

Surveying Division – Surveying and Valuation Services

For further information on all LSL brands
please visit www.lslps.co.uk

Information included in this section of the Report is provided as at 31st December 2016.

Financial Services

LSL’s Financial Services teams specialise in the brokerage of
mortgage and pure protection and general insurance products
through a range of brands. LSL’s combined appointed representative
network is the second largest in the UK5 and across the various
brands, the Group now has 656 appointed representative fi rms and
1,650 advisors. The total value of mortgage completions arranged by
the Group in 2016 was £17.4bn up 20% from 2015.

The Mortgage
Alliance
The Mortgage Alliance is a
trading style of First Complete
and distributes mortgages and
fi nancial services products to
directly authorised mortgage
intermediaries.

www.themortgagealliance.com

First
Complete
Directly
authorised by
the FCA, operating a mortgage
intermediary network. First
Complete acts as principal
for most of the estate agency
businesses within LSL’s Estate
Agency Division, enabling their
employed fi nancial consultants
to off er Financial Services
to customers of the branch
networks.

www.fi rstcomplete.co.uk

Pink Home
Loans
Directly authorised by the FCA,
Pink is a trading style of Advance
Mortgage Funding, operating a
mortgage intermediary network,
providing products and services to
fi nancial intermediaries since 1990,
joining the Group in 2010.

www.think-pink.co.uk

Your Move and Reeds Rains are appointed representatives of First
Complete and provide mortgage, pure protection and general insurance
brokerage services, through employed fi nancial consultants based in the
Estate Agency branches and call centres; Embrace Mortgage Services
which is a trading name of LSLi, does the same across the LSLi group of
companies; and Linear Financial Solutions, an appointed representative
of Pink Home Loans and Openwork, provides those products through a
network of fi nancial consultants based remotely and in the branches of
estate agents. First2Protect is a specialist business arranging household
insurance for customers of LSL’s Estate Agency Division and third party
introducers. Mortgages First is an appointed representative of First
Complete and specialises in providing mortgages and fi nancial services
to customers fi nancing the purchase of new-build property. Insurance
First Brokers is an appointed representative of Sesame and provides
pure protection and general insurance brokerage services for existing
customers of Group First.

www.your-move.co.uk/mortgages
www.reedsrains.co.uk/mortgages
www.embracemortgageservices.co.uk
www.linearfs.com

www.fi rst2protect.co.uk
www.mortgages-fi rst.co.uk
www.insurance-fi rst.co.uk

e.surv Chartered Surveyors
e.surv Chartered Surveyors is one
of the country’s largest provider of
residential valuation services and one
of the largest employers of surveyors in the UK with an active
graduate training programme as part of its commitment to a
sustainable and evolving industry6.

In addition to mortgage valuation services, e.surv provides a range
of products and services to a customer base that includes lenders,
intermediaries, social housing entities, estate agents, and private
homeowners and other stakeholders in the UK residential property
sector.

www.esurv.co.uk

Walker Fraser Steele
One of the longest established
Chartered Surveyor brands in
Scotland, Walker Fraser Steele was founded in Glasgow in 1884 and
became part of e.surv Chartered Surveyors in 2013. The acquisition
substantially expanded LSL’s geographic coverage within Scotland and
the business now provides surveying and valuation services from locations
across Scotland for both local and national clients, including the Home
Report, an essential component of the Scottish home buying process.

www.walkerfrasersteele.co.uk

Notes:
1 The LSL Estate Agency Network is made up of wholly owned and franchised

branches. The market position is based on LSL’s own calculations and assessment
of branch numbers using publicly available data.

2 Source: ResearchBods Brand Awareness Study March 2016.

3 Source: Hitwise December 2016.

4 Source: Google Analytics data.

5 Source: Which Network – network performance fi gures for 2016 showing the

combined numbers for First Complete and Pink Home Loans.

6 The market position is based on LSL’s own calculations and assessment using

publicly available data.

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Milestones

2013

Entered into banking facility.

Acquisition of Lawlors.

Completed ﬁ ve lettings book acquisitions.

Acquisition of Walker Fraser Steele.

2012

Commencement of renewed Barclays Bank
PLC contract for valuation services.

Acquisition of Davis Tate.

Acquisition of Lauristons.

LSL increased its shareholding in Zoopla
which merged with DMGT property portal
businesses during 2012.

2014

Commencement of a new contract with
Lloyds Banking Group for valuation services.

Commencement of renewed contract with
Barclays Bank PLC for valuation services.

Zoopla IPO and special dividend of 16.5
pence per share paid to Shareholders.

Acquisition of Hawes & Co.

Completed 10 lettings book acquisitions.

2015

Acquisition of Thomas Morris.

Completed 30 lettings book
acquisitions.

2016

Extension of bank facility to May 2020.

Acquisition of Group First (including Mortgages
First and Insurance First Brokers).

Sale of entire shareholding in Zoopla.

Completed nine lettings book acquisitions.

04
04

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Chairman’s Statement

Introduction
Following a strong first half performance,
the Group delivered a resilient second
half performance given the changing
market conditions, with 2016 Group
Underlying Operating Profit1 of £34.6m
(2015: £42.9m). Group operating profit
was £65.4m (2015: £41.4m). Group
revenue grew by 2.4% to £307.8m (2015:
£300.6m) with growth in both the Estate
Agency and Surveying Divisions. Profit
before tax grew by 64.6% to £63.5m
(2015: £38.6m).

Performance
After a strong overall first half performance
in the Estate Agency Division, with a notable
first quarter acceleration of transactions
in the run up to the change in stamp duty
regulations on 1st April 2016, we reacted
decisively to the changing market conditions
in the second half of the year with selective
cost reduction measures and branch
closures and protected the balance sheet
by disposing of the Group’s shareholding in
Zoopla and pausing acquisition activity. We
continued to invest in Lettings and Financial
Services headcount during the second half
of 2016. As a result, in 2016 we delivered full
year growth of 9% in the Lettings business
and delivered Financial Services revenue
growth of 27%.

The Surveying Division delivered a robust
performance with 1% revenue growth and a
strong operating profit margin of 27.1%.

Dividend
Due to the Board’s positive view of the
future prospects for the business, the
proposed dividend payment is at the
upper end of our previously stated policy of
applying a dividend pay-out ratio of between
30% to 40% of Group Underlying Operating
Profit after interest and tax. The Board has
reviewed the policy while considering the
risks and capital management decisions
facing the Group.

A final dividend of 6.3 pence per Share (2015:
8.6 pence per Share) will be proposed to
Shareholders at the forthcoming AGM, giving
a total dividend for 2016 of 10.3 pence per
Share (2015: 12.6 pence per Share).

The ex-dividend date for the final dividend is
30th March 2017, with a record date of 31st
March 2017 and a payment date of 2nd May
2017. Shareholders have the opportunity

Marsh & Parsons: Gold overall winners at the Estate Agency of the Year Awards 2016 in association with
The Sunday Times and The Times

to elect to reinvest their cash dividend and
purchase existing Shares in LSL through a
dividend reinvestment plan.

largest providers of residential valuation
services nationwide and is one of the largest
employers of surveyors in the UK2.

We operate in a highly competitive
residential property market, which is
characterised by ongoing new entrants and
evolving business models. We continue to
proactively develop and evolve our offering

Simon Embley
Chairman

Our market position
LSL holds a market leading position in its
core Estate Agency business comprising
12 Estate Agency brands, including Your
Move, which is the largest UK single brand
estate agent measured by the number of
branches with 267 branches nationwide.
The businesses are organised to deliver
integrated Residential Sales, Lettings and
Financial Services, as well as a range of
additional property related services.

We continued to invest in our brands in
2016 to drive future growth, with a national
media campaign to support the Your
Move brand during the first half of 2016
and by increasing dedicated headcount
to support our successful Lettings and
Financial Services businesses and
growing our Land & New Homes
businesses. During 2016 we
opened two new Marsh &
Parsons branches.

We continue to hold a
leading market position in
Surveying, maintaining
strong relationships with
many of the major lenders.
LSL’s Surveying Division
is one of the country’s

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LSL AR 2016_Sect1-3 B&C.indd 5

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Chairman’s Statement

£307.8m

Group revenue
Up 2.4% – 2015 £300.6m

£65.3m

Profi t before tax
Up 64.6% – 2015 £38.6m

25.9p

Adjusted Basic Earnings Per Share
Down 18% – 2015: 31.5p

10.3p

Full year dividend per Share
2015: 12.6p

Full year 2016
Underlying Opertating Profi t

£34.6m

41%

59%

n Estate Agency
n Surveying

to ensure our competitiveness in this
changing marketplace. We will also take
selective cost action as required to underpin
our competitiveness, as we did
in the second half of 2016.

During the second half of 2016 we
completed extensive consumer and market
research. In 2017 we will progress the
next phase of our strategy by exploring
and evaluating LSL’s digital opportunities
and a further update will be provided to
Shareholders during 2017.

We continue to selectively acquire
businesses. To drive recurring income
growth, we acquired nine lettings books in
2016 for £4.1m (2015: 30 lettings books for
£9.6m), with internal disciplines in place to
ensure successful integration into the Group.

In February 2017 we acquired a 65%
interest in Group First which provides
mortgage and protection brokerage
services to the purchasers of new homes.
This acquisition supports LSL’s strategy
to grow long-term profi tability in the UK
residential property services sector.

In Financial Services, the Group arranged
total mortgage lending of £17.4bn (2015:
£14.5bn), representing 7.1% of the overall
market3. Measured by the number of
appointed representatives, LSL’s overall
combined network is the second largest in
the UK4.

LSL notes the publication of the Housing
White Paper in February 2017 which
confi rmed the Government’s intent (as
announced in the Autumn Statement in
November 2016) to bring forward legislation
(as soon as Parliamentary time allows)
to ban letting agent fees to tenants. LSL
will continue to monitor the review and
contribute to the consultation as appropriate
during the year.

Corporate governance and Board
The Board remains committed to high levels
of corporate governance and during 2016,
LSL has complied in all respects with the UK
Corporate Governance Code (September
2014 edition). We have also considered the
amendments included in the April 2016
edition of the Code to ensure we continue
to comply during 2017 and are monitoring
the Government’s review of corporate
governance, which is set out in the Green
Paper published in November 2016.

There were a number of changes to
the Board during the year. At the 2016
AGM, Mark Morris, who had been a
Non Executive Director and Chairman
of the Audit Committee since LSL’s IPO
in 2006, retired from the Board and its
Committees. David Stewart, who joined
the Board as a Non Executive Director
in May 2015, was appointed Chairman
of the Audit Committee. David is also
a member of LSL’s Remuneration and
Nominations Committees. In January
2017, Adrian Gill stepped down from
the Board and on 2nd February 2017 we
announced the appointment of Helen Buck
as Executive Director – Estate Agency.
Helen had been a Non Executive Director
of LSL since December 2011 and has
excellent knowledge of the business. Her
appointment followed a comprehensive
selection process.

The Nominations Committee has during
the year reviewed the Board’s composition,
which at the date of this Report includes
three independent Non Executive Directors
and three Executive Directors and myself
as Chairman. The Board has expertise
in strategy, technology, estate agency,
surveying, fi nancial services, the residential
housing sector, commercial property,
retail and marketing, operations, business
services, entrepreneurial private and
public companies, fi nance, consumer
and employee matters and corporate
governance.

The Board continues to recognise the
benefi ts of diversity in the boardroom,
including gender and racial diversity and
the current Board composition includes
two female Directors, Helen Buck
(Executive Director – Estate Agency) and
Kumsal Bayazit Besson (Independent Non
Executive Director). Whilst we continue
to remain of the view that the setting of
targets for the number of female directors
on the Board is not necessary and that
we will continue to appoint on merit, I will
continue to ensure that our searches for any
new directors take into account diversity,
including gender and race.

In respect of 2016, the Board has
conducted an annual review of its
eff ectiveness and that of its Committees,
taking into account the balance of skills,
experience, independence and knowledge

LSL AR 2016_Sect1-3 B&C.indd 6

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Full Year 2015

Average FTE

4,667

14%

Total Mortgage Approvals

for House Purchase1

‘000s

610

799

806

769

736

2016

2015

2014

2013

2012

668

582

Remortgage and
Other Loans Volumes

511

550

541

86%

Estate Agency
Branches

538

187

282

Number of acquisitions

n Estate Agency
n Lettings books
n Surveying

2016

2015

2014

2013

Total Mortgage Approvals

Ian Crabb, Group Chief Executive Oﬃ cer and Simon Embley, Chairman

33,900

2016

2015

2014

2013

2012

1,467

1,388

1,280

1,286

1,151

2016

2015

2014

2013

2012

28,900

21,000

Underpinned by a series of strategic
initiatives, the business is well placed to
deliver a solid performance in 2017. We
are positive regarding the outlook for the
7,700
business, committed to driving profi table
organic growth across the business,
and will continue to evaluate selective
acquisitions.

10,200

2016

The Group has a robust balance sheet
with relatively low levels of gearing and
2015
is very cash generative at an operational
level. The business is well placed to
2013
capitalise on market conditions to increase
Shareholder value.

2014

2012

Simon Embley
Chairman
7th March 2017

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Notes:
1 Group Underlying Operating Profi t is before
exceptional costs, contingent consideration,
amortisation of intangible assets and share-based
payments (as defi ned in Note 5)

2 Source: LSL estimates

3 Source: Council of Mortgage Lenders – January 2017

4 Source: Which Network? January 2017

24/03/2017 16:08

21%

79%

of our businesses. Following this exercise,
we concluded that the Board and its
Committees are eff ective and are able
to discharge their respective duties and
responsibilities appropriately. The appraisal
produced a number of recommendations
to further improve the eff ectiveness of
the Board, which will be implemented
during 2017. These include reviewing
Board meeting planning and reporting
arrangements, the development of
Executive Director and senior management
succession plans, the provision of Director
training and an evaluation of the Group’s
cultures, values and ethics.

In addition, and taking into consideration
the revised Code published in April 2016,
the Board reviewed the composition of
the Audit Committee and confi rmed that
the Audit Committee as a whole has the
competence relevant to the sectors in
which LSL operates. Further details relating
to the Audit Committee are contained in
the Audit Committee Report.

As Chairman, with the responsibility
for leadership of the Board, I review its
eff ectiveness on all aspects of its role and
encourage feedback.

Our people
Ultimately the success of our business
model has always been underpinned
by our strong brands and excellence
in delivery by our knowledgeable local

Repossesion Volumes2

colleagues. The number of Group employees
as at 31st December 2016 was 4,990 (2015:
5,181). Our success is attributable to the
high levels of customer service provided by
our staff in all parts of our business across
the entire UK and I would like to thank all of
our staff for the continued hard work and
commitment which they have demonstrated
throughout 2016.

Current trading and outlook
We have started the year positively in both
the Estate Agency and Surveying Divisions.

In the Estate Agency Division, trading is
encouraging and in line with expectations,
with quality buyers and good availability
of mortgages. Whilst there remains a
shortage of stock, our sales conversion
remains strong.

In our Surveying Division, trading is in line
with expectations and the second phase of
the technology refresh is progressing well.

Whilst it is diffi cult to accurately predict
housing market transaction volumes and
consumer confi dence for the remainder
of the year, 2017 is expected to see a
reduced volume of house purchase
transactions compared to the prior year,
with modest house price infl ation outside
prime Central London. However, mortgage
costs and availability remain positive and
the medium to longer term fundamentals of
the UK housing market remain robust.

LSL AR 2016_Sect1-3 B&C.indd 7

Group Chief Executive’s Review

2016 Overview
As reported in the Interims Results
announcement in August 2016, the Group
delivered a strong first half performance,
with the notable acceleration of
transactions in the first quarter in the
lead up to the change in stamp duty
on 1st April 2016. The Group reacted
decisively to the changed market
conditions in the second half of the year
following the EU referendum result.

Selective cost measures were taken across
the Group and the balance sheet has been
strengthened with our operational gearing
ratio1 reduced to 0.51 at the end of 2016
(2015: 0.83). We continued to invest in
the growing parts of our businesses and
delivered strong year-on-year revenue
growth in Lettings (up 9%) and Financial
Services (up 27%).

Group revenue increased by 2.4%
to £307.8m (2015: £300.6m). Group
Underlying Operating Profit2 was £34.6m
(2015: £42.9m) and Group operating profit
was £65.4m (2015: £41.4m). After strong
first half revenue growth of 8% and profit
growth of 10%, second half revenue fell
by 2.5%, impacted by residential property
market trends following the EU referendum,
with a subsequent fall in second half profits.

I would like to take this opportunity to thank
all my colleagues across our business
for their professionalism and dedication.
The efforts of my colleagues delivered
revenue growth in both Estate Agency and
Surveying, which was especially pleasing
given the degree of change during the year.

Your Move: Gold best Property Management winners at the Lettings Agency of the Year Awards 2016 in
association with The Sunday Times and The Times.

The market in 2016
The UK residential property services
market in 2016 was impacted by two main
events; the lead up to the stamp duty
changes on 1st April 2016 and the
EU referendum outcome on 23rd June
2016; and the subsequent impact on
consumer confidence and residential
property transactions during the second
half of the year.

Approvals for house purchases3 were
ahead 16.5% in the first quarter of the year
compared to the same period in 2015 as
increases in stamp duty effective from 1st
April 2016 led to an acceleration in market
activity in the period up to this change.
Volumes3 slowed in the second quarter
being 1.5% ahead of the comparative
period in 2015 as completions slowed
following the stamp duty change and ahead
of the EU referendum on 23rd June 2016.

Following the EU referendum on 23rd June
2016 consumer confidence was impacted
and volumes3 fell by 12.4% in the third
quarter compared to the same period in
2015. Volumes3 fell again by 4.8% in the
fourth quarter of 2016 compared to the
same period in 2015.

The second half impact on market
transactions was more pronounced in
London and the South East. Market
transactions are estimated to have fallen in
prime Central London areas by between
20% to 40% in the third quarter 2016,
dependent on the postcode4.

Total Mortgage Approvals3 increased by
5.7% in 2016. This reflected an increase
in remortgage approvals in the first and
second half of 2016 compared to the same
periods in 2015 reflecting low interest rates
and the availability of remortgage products.

Average house prices5 in England and
Wales grew 3.1% (2015: 6.6%) to £298,000
annually as stock shortages continued to
have an impact. Excluding London and the
South East, the average increase was 4.4%.

Residential property values in Greater
London increased by 0.2%. Prime Central
London (5 prime boroughs) prices fell while
outer prime Central London experienced an
increase in year-on-year house prices5.

The proportion of new sales instructions
given to online/hybrid estate agents
continued to grow, increasing from 3% of
the market in the second half of 2015 to 6%
in the second half of 20166. While traditional
estate agents continue to represent the vast
majority of the market (95% of residential
sales instructions in 20166), we continue to
closely monitor market developments.

The proportion of mortgage lending in
the market placed through intermediaries
continued to increase during the year7.

Following market declines in the
repossessions market in the past few
years, market repossession volumes again
declined in 2016, reducing by 25% to
7,7008 total repossessions as interest rates
remained low and was the lowest number
since 1982.

08
08

LSL AR 2016_Sect1-3 B&C.indd 8

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result of the EU referendum which caused
transaction levels to drop significantly,
Marsh & Parsons revenue fell by 5% in 2016
to £33.5m (2015: £35.3m) and profit fell by
36% to £4.4m (2015: £6.9m).

Whilst Residential Sales fell by 12% we
believe this to be a solid performance
in light of the overall London market
conditions. We were pleased with the
Lettings performance with Lettings income
up 6% against 2015, accounting for more
than half of Marsh & Parson’s total revenue.

We continued with our branch expansion
strategy in 2016, opening two new
branches during the year in the outer prime
Central London locations of Tooting and
Tufnell Park. We have continued with our
strategy in 2017 and since the year-end
have opened a branch in Brixton. We are
pleased with the performance of these new
branches. This takes our total number of
Marsh & Parsons branches to 26.

Our ambition remains to expand to 36
branches by 2019. Outer prime Central
London has not been as negatively
impacted as prime Central London and
Marsh & Parsons is looking to expand its
new office footprint in outer prime Central
London locations.

Estate Agency profit per branch
(Your Move, Reeds Rains and LSLi)
The reduction in operating profit per
owned branch in 2016 to £30,500 (2015:
£42,500) reflects the challenging residential

Ian Crabb
Group Chief
Executive Officer

Strategy
We remain committed to delivering on
our stated strategy:

Estate Agency
• Ambition to drive operating profit per

branch to between £80,000 and £100,000
in the medium term.

• Ambition to expand the number of Marsh
& Parsons branches to a total of 36 by
2019, particularly outside prime Central
London.

• Grow recurring and where market

conditions permit counter-cyclical income
streams.

• Complete selective acquisitions of both
residential sales businesses and lettings
books.

In addition to delivering on our stated
strategy, we are also exploring options to
capitalise on digital opportunities created
by the growth in consumer acceptance
of online/hybrid agency business models.
During the second half of 2016 we
completed extensive consumer and market
research and in 2017 we are progressing to
the next phase by exploring and evaluating
LSL’s digital opportunities. We will provide a
further update to Shareholders during 2017.

Surveying
• Optimise contract performance and
revenue generation from business to
business customers.

• Achieve further improvement in efficiency

and capacity utilisation.

• Use technology to target further

improvements in customer satisfaction
and performance.

• Continue the graduate training programme.

LSL performance in 2016
Total Estate Agency income of £243.1m
(2015: £236.5m) increased by 3%. This
increase resulted from the consistent
execution of our strategy with strong growth
in both Lettings and in Financial Services
income, where we continued to invest in
additional people to support growth.

During the second half of the year following
the EU referendum we implemented
selective cost reduction measures to adapt
the Group’s costs base and ensure we
remain competitive. We closed 21 branches

in the second half with little disruption to
our business, which is testament to the
professionalism and experience of our staff.

Residential Sales exchange income
Residential Sales exchange income
decreased by 10% to £83.8m (2015: £92.9m)
with average fees per unit down 2%.
Exchange volumes fell by 8%, with a strong
first quarter followed by a slowdown in sub-
sequent quarters following the stamp duty
changes and the EU referendum. The fall in
fees reflected increased competitive pressure
in the second half as volumes reduced.

Lettings income
We remain committed to our strategy
of increasing recurring Lettings income.
In 2016 we delivered growth in Lettings
income of 9%. Lettings income increased
as a proportion of the Estate Agency
business and represented 29% of total
Estate Agency Division income in 2016
(2015: 28%).

We delivered organic Lettings growth of 4%
with growth across all our brands. In line
with our strategy, we continued to invest
in lettings book acquisitions, acquiring
nine lettings books in 2016 for a total
consideration of £4.1m9. The lettings books
have been successfully integrated into our
networks. Lettings book acquisitions were
paused during the second half of the year
following the EU referendum.

Financial Services
Total Financial Services income grew
strongly again with 27% year-on-
year growth in 2016. Adjusting for the
acquisition of Group First, we delivered
organic growth of 13% as we continued to
roll out our model across the Estate Agency
business and delivered growth from our
intermediary networks.

In February 2016 we acquired a 65% interest
in Group First which provides mortgage
and protection brokerage services to
the purchasers of new homes. This
acquisition supports LSL’s strategy
to grow long-term profitability
in the UK residential property
services sector.

Marsh & Parsons
Given the overall challenging
prime Central London market,
compounded by the

LSL AR 2016_Sect1-3 B&C.indd 9

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Group Chief Executive’s Review

sales market conditions following the EU
referendum.

Award and Best Large UK Estate Agency
– Gold Award.

LSL has increased operating profit per
owned branch from £20,100 in 2012 to
£30,500 in 2016. Our medium term ambition
is to drive operating profit per owned branch
to between £80,000 and £100,000 on the
expectation of longer term stability in the
UK residential property sector. Our Lettings
growth and Financial Services growth across
the network continues to underpin this
ambition and we will also focus on Land &
New Homes. We will also consider further
opportunities to re-engineer the cost base.

Surveying Division
During 2016 we continued to focus on
optimising the profitability of our Surveying
business with particular emphasis on
delivering a market leading IT system.
Total Surveying Division income in 2016 of
£64.7m (2015: £64.1m) was 1% higher than
2015, reflecting a good performance in a
changing market.

During the first half of 2016, implementation
started of a new market leading IT system
to deliver modern and scalable technology
for LSL that provides an improved platform
to deliver services to our clients. Phase
one is complete and a roadmap of further
developments will be rolled out in 2017. This
system will enable our Surveying Division to
continue to improve efficiency, operational
performance and hence the quality of
service to our end customers.

Following on from the significant
improvements in 2014 and 2015, capacity
optimisation has been maintained helping
to underpin profit margins of 27.1% (2015:
28.3%). Income per job increased by 4%
to £203 (2015: £196) and we performed in
total 318,077 jobs in 2016 (2015: 327,267)
as we optimised the mix of our business.
We have continued with our graduate
training programme which continues to be
successful.

Our customers
Our continued focus on providing the
best service to our customers has been
recognised in 2016 with numerous industry
awards including:

• Marsh & Parsons: Estate Agency of the

Year Awards 2016, in association with The
Times and The Sunday Times: Overall
Winner of the Estate Agency of the Year

• Your Move: Lettings Agency of the Year
Awards 2016, in association with The
Times and The Sunday Times: Best
Property Management (1001+ properties)
Lettings Agency – Gold Award.

• Davis Tate: Estate Agency of the Year
Awards 2016, in association with The
Times and The Sunday Times: Best
Medium Estate Agency, South East – Gold
Award. The 2016 allAgents Awards: Best
Estate Agent – Overall Winner in Reading,
Best Estate Agent – Gold Awards in 10 UK
postcode regions: Best Letting Agent –
Gold Award in 8 UK postcode regions.

• Frost’s Estate Agent: Estate Agency of the
Year Awards 2016, in association with The
Times and The Sunday Times: Best Small
Estate Agency, East of England – Gold
Award.

• Intercounty: Estate Agency of the Year
Awards 2016, in association with The
Times and The Sunday Times: Best
Medium Estate Agency, East of England
– Gold Award. Lettings Agency of the
Year Awards 2016, in association with
The Times and The Sunday Times: Best
Medium Lettings Agency, East of England
– Gold Award.

• Thomas Morris: The Negotiator Awards
2016: East of England Agency of the
Year – Gold Award. Relocation Agent
Network Awards 2016: Best Agent, East
Anglia and Essex – Winner, Customer
Relocation Award – Winner. The 2016 all
Agents Awards: Best Estate Agent, East
of England – Gold Award. Agents Giving:
Best Innovative and Creative Fundraising
Award – Winner. Agency Mentors:
Inspirational Agent 2016 – Winner (Sue
Gipson St.Neots).

• Pink Home Loans: Financial Adviser
Service Awards 2016: 5 star award.

• Pink Home Loans and First Complete
Financial Services: Precise Mortgages
Awards 2016: Best Distributor Group.

• e.surv Chartered Surveyors: Equity

Release Awards 2016: Best Surveyor
Award – Winner. Mortgage Strategy
Awards 2016: Best Surveyor Award,
Individual Firms – Winner. Your Mortgage
Awards 2016: Best Surveyor Award –
Winner.

Balance sheet and exceptionals
The Group has a strong balance sheet with
closing Net Bank Debt at 31st December
2016 of £20.3m (2015: £39.9m) and a
gearing level at 0.51 times 2016 adjusted
EBITDA (2015: 0.83 times)1.

Between 20th July 2016 and 31st October
2016, we sold our entire holding of 11.3m
ordinary shares in Zoopla for total proceeds
of £36.1m at an average price per share of
£3.19. The proceeds of the disposal were
used to reduce corporate indebtedness.

As set out in our 2016 Interim Results
announcement, during the second half of
2016, a cost saving programme across the
Group and the technological refresh in the
Surveying Division resulted in exceptional
costs of £2.3m.

In relation to the PI Costs provision, the
Group continued to make positive progress
in addressing historic claims and there has
been a net £1.6m exceptional release.

Outlook
We have started 2017 in line with our
expectations across the Group and are
well placed to deliver a solid performance
during the year. We continue to consistently
execute on our strategy and are well placed
to deliver increased Shareholder value.

I look forward to working with my colleagues
to deliver a successful year in 2017.

Ian Crabb
Group Chief Executive Officer
7th March 2017

Notes:
1 Operational gearing is defined as net debt divided
by adjusted EBITDA (Adjusted EBITDA is Group
Underlying Profit (Note 5) plus depreciation on
property plant and equipment)

2 Group Underlying Operating Profit is before
exceptional costs, contingent consideration,
amortisation of intangible assets and share-based
payments (as defined in Note 5)

3 Source: Bank of England for “House Purchase
Approvals” and “Total Mortgage Approvals” -
December 2016 released January 2017

4 Source: LSL estimates
5 Source: December 2016 LSL Property Services/

ACADATA HPI

6 LSL sources/data analysis
7 CML, new mortgages sold by intermediaries –

February 2017

8 Source: Council of Mortgage Lenders – January 2017,

released February 2017

9 Total consideration of up to £4.1m includes contingent

consideration

LSL AR 2016_Sect1-3 B&C.indd 10

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Strategic Report

In this section
12 Strategy
13 Business Model
14 Markets
16 Business Review – Estate Agency Division
19 Business Review – Surveying Division
20 Financial Review
22 Principal Risks and Uncertainties
26 Corporate Social Responsibility
32 The Board

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Reeds Rains brochure

LSL AR 2016_Sect1-3 B&C.indd 11

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Strategy

LSL is committed to delivering
long-term Shareholder value
by building market leading
positions in the residential
property services market
through organic growth,
selective acquisitions and
the delivery of high quality
service and appropriate
outcomes for customers

LSL remain committed to the strategy to grow long-term profi tability in the UK
residential property services sector, by identifying value enhancing opportunities.
The components of LSL’s strategy are:

Estate Agency and Related Services:
• Ambition to drive operating profi t per branch to between £80,000 and £100,000 in the

medium term.

• Ambition to expand the number of Marsh & Parsons branches to a total of 36 by 2019,

particularly outside prime Central London.

• Grow recurring and where market. conditions permit counter-cyclical income streams.
• Complete selective acquisitions of both residential sales businesses and lettings books.

In addition to delivering on the stated strategy, LSL is exploring options to capitalise on digital
opportunities created by the growth in consumer acceptance for online/hybrid agency
business models. During the second half of 2016 LSL conducted extensive consumer and
market research and in 2017 LSL is progressing to the next phase by exploring and Evaluating
LSL’s digital opportunities. LSL will provide a further update to Shareholders during 2017.

Surveying and Valuation Service:
• Optimise contract performance and revenue generation from business to business

customers.

• Achieve further improvement in effi ciency and capacity utilisation.
• Use technology to drive further improvements in profi tability.
• Continue graduate training programme.

Full year 2016 average FTE

Estate Agency and Related Services:

4,630

14%

86%

n Estate Agency
n Surveying

Estate Agency branches

514

157

267

n Your Move
n Reeds Rains
n LSLi
n Marsh & Parsons

41%

Residential Sales and Lettings
• Deliver future branch profi tability through

Lettings income growth, Financial Services
income growth, Land & New Homes
growth and re-engineering the costs base
together with volume and fee growth, lettings
book acquisitions and selective branch
refurbishments.

• Provide a service proposition that recognises

customer needs and maximises income
across the value chain.

• Drive organic growth through increasing

Residential Sales transaction volumes and
investing further in Lettings services.

• Grow LSL’s share of the prime and outer

prime Central London Residential Sales and
Lettings markets by supporting Marsh &
Parsons’ branch expansion plans.

• Grow recurring revenue (e.g. Lettings) and
where market conditions permit, counter-
cyclical income (e.g. Asset Management).

• Identify, evaluate and invest in selective

acquisitions.

Asset Management
• Grow counter-cyclical income streams where

market conditions permit.

• Increase market share by providing innovative

solutions and strong service delivery to a
broader selection of clients.

Financial Services
• Consistent delivery of appropriate customer
outcomes for consumers and maintain focus
on best practice standards of regulatory
compliance.

• Capitalise on mortgage market shift towards

intermediary distribution channels.
• Investment in selective acquisitions.

• Investment in additional mortgage advisors

within the Estate Agency branches.
• Grow LSL’s intermediary networks and

expansion of the Group’s mortgage club
and realise synergies and cost savings to
make the networks more effi cient.

• Enhancements of technology solutions to
improve the customer experience, raise
productivity and deliver process effi ciencies.

• Use the networks to strengthen

relationships with key lender clients and
to provide high quality service and good
fi nancial outcomes for consumers.

Surveying and Valuation Services:

• Focus on the business to business market

where the economics are better and
service business to consumer clients
where capacity allows.

• Optimise contract performance and
revenue generation from business to
business customers.

• Investment in a market leading IT system

that provides scalable and secure
technology to deliver services to clients.
• Continue focus on improving effi ciency

through optimising capacity management
supported by new IT technology.

• Continued investment and delivery of the

graduate training programme which assists
in alleviating the impact of skills constraints
in the market.

Acquisitions:

• Continue to identify, evaluate and invest
in selective value enhancing acquisitions
across the residential property services
value chain in order to enhance market
positions and to grow scale.

LSL AR 2016_Sect1-3 B&C.indd 12

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59%

Business Model

Customers

ess

cial Services Networks
agement Brands
ew Homes Business
ncy Brands
er Relationships
hhips
v Brand
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3 A
311
1

B2C –
Landl
Landlords, Tenants
B2B –
Housebuilders
HHHHous

B2C – House sellers, House purchasers,
B2B – Banks/Building Societies,
L enders – Banks/building
LLLLL een
S o cieties
SS o c

ettiiees,

rs,

Market
Leading
Positions

S
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LSL’s Assets

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s

Strong
revenue
and profit
margins

Investment

Cash-flow

n Estate Agency and Related Services
n Surveying and Valuation Services

Dividends

LSL’s business model is how LSL puts its strategy into action. The execution of the strategy results in market
leading positions in the Group’s business segments which produces a virtuous circle of strong revenues, profit-
ability and cash-flow which allows significant reinvestment in the business in order to further enhance LSL’s
market positions while also paying out a significant proportion of earnings as a dividend to Shareholders.

• LSL has market leading positions in residential property

surveying, mortgage valuations, asset management, residential
sales, lettings and mortgage, pure protection and general
insurance brokerage services.

• LSL serves retail customers in its Estate Agency businesses,
such as house sellers and buyers, and landlords and tenants
by providing Residential Sales, Lettings, mortgage, pure
protection and general insurance brokerage services and other
related services.

• LSL serves business customers in its Surveying and Asset
Management businesses, such as banks and building
societies, and benefits from long-term relationships and
contracts.

• The growth and reputation of LSL is dependent on providing
exceptional service and appropriate outcomes for customers.

• The business model has demonstrated resilience to changes in the
residential property market due to its market positions in Lettings
(recurring income) and Asset Management (counter-cyclical income).

• The model benefits from scale and investment to ensure the

Surveying business has the best technology in the market to help it
maintain its market leading position and to improve quality, service
performance and risk management for clients.

• The Estate Agency branches focus on customer service by utilising
hubs and call centres to provide instructions to the branches and to
handle certain administrative tasks centrally.

• The business has low capital requirements and is highly cash

generative.

• LSL allocates the strong cash generation between paying dividends
to Shareholders, reinvesting in the business to drive future organic
growth and in making selective, value adding acquisitions.

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Markets
LSL operates across the residential property services value chain

In 2016 Total Mortgage Approvals increased by 5.7% to 1,467m (2015:
1.388m)1. Overall House Purchase Approvals fell by 0.9% to 799,000
(2015: 806,000)2. Remortgage volumes of 668,000 were up by 15%
compared to 2015 (2015: 582,000)2.

Market transaction data

Total mortgage
approvals for house
purchase1
‘000s

736
736

769
769

799
799

806
806

Total Mortgage Approvals
Total Mortgage Approvals
for House Purchase1
for House Purchase1
‘000s
‘000s
Total Mortgage Approvals
Total Mortgage Approvals
for House Purchase1
for House Purchase1
‘000s
‘000s

610
610

736
736

610
610

2016
2016

2015
2015

2014
2014

2013
2013

2012
2012

Remortgage and other
loans volumes1
‘000s

511
511

668
668

582
582

Full Year 2016 Revenue

£307.8m

Remortgage and
Remortgage and
Other Loans Volumes
Other Loans Volumes

Remortgage and
Other Loans Volumes

Total Mortgage Approvals
Total Mortgage Approvals

Total Mortgage Approvals

550
550

541
541

2012
2012

Total mortgage
approvals2
‘000s

1,286
1,286

1,151
1,151

1,286
1,286

1,151
1,151

511
511

2014
2014

2013
2013

2016
2016

2015
2015

1,467
1,467

1,388
1,388

1,467
1,467

1,388
1,388

1,280
1,280

2016
2016

2015
2015

2014
2014

2013
2013

2012
2012

Repossessions volumes3
33,900
33,900

Repossesion Volumes2
Repossesion Volumes2

Repossesion Volumes2

33,900
33,900

28,900
28,900

21,000
21,000

10,200
10,200

7,700
7,700

21%

79%

Full Year 2015

Average FTE

Full Year 2015

4,667

Average FTE

4,667

14%

86%

Estate Agency

86%

Branches

Estate Agency

Branches

538

Branches

538

187

282

2016

2015

2014

2013

21%

79%

2016
2016

2015
2015

2014
2014

2013
2013

2012
2012

n Estate Agency
n Surveying

LSL AR 2016_Sect1-3 B&C.indd 14

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LSL’s Markets

LSL’s market can be categorised into two principal segments

Estate Agency and Related Services; and

Surveying and Valuation Services.

Estate Agency and Related Services

Estate Agency and
Related Services

79.0%

of Group revenue in 2016 (2015: 78.7%)

The Estate Agency and Related Services
segment (the Estate Agency Division)
includes Residential Sales and Lettings
and the related markets of Asset
Management (including repossessions
asset management services for lenders
and property management for multi-
property landlords) and Financial Services
– predominantly mortgage, protection
general insurance brokerage services
with revenue earned directly by the Estate
Agency brands and through the operation
of intermediary networks.

Residential Sales
and Lettings

50.4%

of Group revenue in 2016 (2015: 52.7%)

Estate Agency services for residential
property sales.

Comprehensive Lettings service for
residential landlords and tenants.

The UK residential property services market
in 2016 was impacted by two main events:
the lead up to the stamp duty changes on
the 1st April 2016; and the EU referendum
outcome on 23rd June 2016 and the
subsequent impact on consumer confidence
and residential property transactions during
the second half of the year.

Approvals for house purchases1 were
ahead 16.5% in the first quarter of the year
compared to the same period in 2015 as
increases in stamp duty effective from 1st
April 2016 led to an acceleration in market
activity in the period up to this change.
Volumes1 slowed in the second quarter
being 1.5% ahead of the comparative
period in 2015 as completions slowed
following the stamp duty change and ahead
of the EU referendum on 23rd June 2016.

Following the EU referendum on 23rd June
2016 consumer confidence was impacted

and volumes1 fell by 12.4% in the third
quarter compared to the same period in
2015. Volumes1 fell again by 4.8% in the
fourth quarter of 2016 compared to the
same period in 2015.

Total Mortgage Approvals1 increased by
5.7% in 2016. This reflected an increase
in remortgage approvals in the first and
second half of 2016 compared to the same
periods in 2015 reflecting low interest rates
and the availability of remortgage products.

Residential property values in Greater
London increased by 0.2%. Prime Central
London (5 prime boroughs) fell while outer
prime Central London experienced an
increase in year-on-year house prices.

The proportion of new sales instructions
given to online/hybrid estate agents
continued to grow, increasing from 3%
of the market in the second half of 2015
to 6% in the second half of 20164. While
traditional estate agents continue to
represent the vast majority of the market
(95% of residential sales instructions in
2016)4, LSL continues to closely monitor
market developments.

The proportion of mortgage lending in
the market placed through intermediaries
continued to increase during the year.

Following market declines in the
repossessions market in the past few
years, repossession volumes again
declined in 2016, reducing by 25% to
7,7003 total repossessions as interest
rates remained low and was the lowest
since 1982.

Asset
Management

2.1%

of Group revenue in 2016 (2015: 2.6%)

Repossessions asset management
services for lenders.

Property management services for multi-
property landlords.

Repossession volumes fell by 25% to 7,700
(2015: 10,200) in 20163 in a declining market.

Mortgage, pure
protection and
general insurance
brokerage services

20.8%

of Group revenue in 2016 (2015: 16.8%)

Brokerage services for mortgages, pure
protection and general insurance.

Other
income

5.6%

of Group revenue in 2016 (2015: 6.6%)

Includes franchising income, conveyancing
services, EPCs, Home Reports, utilities and
other products and services to clients of
the Estate Agency branch network.

Surveying and Valuation Services

Surveying and
Valuation Services

21%

of Group revenue in 2016 (2015 21.3%)

Valuation services for lenders for residential
mortgage purposes, surveying services for
private house purchasers, and the provision
of Home Reports and professional services
in Scotland.

Notes:
1 Source: Bank of England for “House Purchase
Approvals” and “Total Mortgage Approvals”
Deccember 2016 released January 2017

2 CML, new mortgages sold by intermediaries

3 Source: Council of Mortgage Lenders arrears and

repossessions data relating to properties taken into
possession by first-charge mortgage lenders for 2016

4 LSL estimates

5 Source: December 2016 LSL Property Services/

ACADATA HPI

LSL AR 2016_Sect1-3 B&C.indd 15

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Business Review
Estate Agency Division

+3%Total income

2015: +5%

-10%Exchange income

2015: +1%

+9%Lettings income

2015: +12%

+27%Financial Services income

2015: +16%

-2%Fee per exchange unit

2015: +4%

10.1%Operating margin

2015: 13.2%

Financial
Residential Sales exchange income
Lettings income
Asset Management income
Financial Services income
Other income1

Total income
Operating expenditure
Underlying Operating Profi t2

KPIs
Exchange units
Underlying Operating Margin (%)
Fees per unit £

Market data
House Purchase Approvals (000s)3
Total Mortgage Approvals (000s)3
UK Housing Transactions (000s)4
Repossessions5

2016
£m
83.8
83.8
71.4
71.4
6.6
6.6
64.1
64.1
17.2
17.2

243.1
243.1
(218.6)
(218.6)
24.5
24.5

2016
27,029
10.1
3,102

2016
799
1,467
1,235
7,700

2015
£m

92.9
92.9
92.9
65.4
65.4
65.4
7.8
7.8
7.8
50.5
50.5
50.5
19.9
19.9
19.9

236.5
236.5
236.5
(205.2)
(205.2)
(205.2)
31.3
31.3
31.3

2015

29,311
13.2
3,170

2015

806
1,388
1,230
10,200

%
change

-10
-10
-10
+9
+9
+9
-15
-15
-15
+27
+27
+27
-14
-14
-14

+3
+3
+3
-6
-6
-6
-22
-22
-22

%
change

-8

-2

%
change

-1
6
1
-25

Notes:
1 ‘Other income’ includes franchising income, conveyancing services, EPCs, Home Reports, utilities and other products and

services to clients of the branch network.

2 Refer to Note 4 for the calculation.
3 Source: Bank of England, “Mortgage approvals for house purchases” and “Total Mortgage approvals” – December 2016, released

January 2017.

4 Source: HMRC Stats, “Monthly property transactions completed in the UK with value of £40,000 or above” – December 2016,

released January 2017.

5 Source: Council of Mortgage Lenders - January 2017, released February 2017.

Estate Agency Division performance
Year-on-year income growth in the Estate
Agency Division was 3%. Lettings income
and Financial Services income showed
positive growth with Residential Sales
impacted by lower transaction volumes
in the second half. First half total income
increased by 9% compared to the
comparative period in 2015 whilst second
half income fell by 3%.

Residential Sales exchange income
Residential Sales exchange income
decreased by 10% to £83.8m (2015: £92.9m)
with average fees per unit decreased by
2%. Residential Sales exchange volumes fell
by 8%. The trend mirrored the general
market with a strong fi rst quarter followed
by a slowdown in subsequent quarters
following the stamp duty changes and the
EU referendum. The fall in fee refl ected
increased competitive pressure in the
second half as volumes reduced.

The second half reduction in transactions
was more pronounced in LSL’s London and

the South East brands, refl ecting the same
trends as the general market.

Lettings income
Lettings income grew in each quarter of
the year and across all brands as LSL
continued to focus on this growing revenue
stream. Organic Lettings growth for the
year was 4%. Combined with the Lettings
acquisitions, overall growth was strong, at
9% for the full year. LSL continues to focus
on this recurring revenue stream which
represented 29% of total Estate Agency
Division income in 2016 (2015: 28%).

Financial Services income
Total Financial Services income delivered
through the Estate Agency Division’s
branches, Group First (acquired during
the year) and the intermediary networks
of First Complete and Pink Home Loans
grew strongly again with 27% year-on-year
growth in 2016.

Adjusting for the acquisition of Group First,
organic Financial Services income growth
for 2016 was 13% and growth was achieved

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groups. LSL has also on behalf of all its
Estate Agency businesses entered into
a primary authority agreement with York
Trading Standards Offi ce. LSL is monitoring
the Government’s review of the housing
market, which is set out in the Housing
White Paper published in February 2017
and is considering the impact of the reforms
on LSL’s businesses.

Branch numbers
Breakdown of LSL’s Estate Agency
branches as at 31st December 2016.

Owned Franchised

Totals

Your Move

Reeds Rains

LSLi

Marsh & Parsons

Totals

202

117

407

267

157

107

514

across all Estate Agency brands and also
the intermediary network businesses.

did not fully off set the fall in repossession
volumes.

In total the Group arranged mortgage
lending completions of £17.4bn during 2016
(2015: £14.5bn), with an estimated market
share of 7.1%5.

Other income
Other income fell by 14% year-on-year as
conveyancing income fell in line with lower
residential transaction volumes.

Marsh & Parsons
Marsh & Parsons delivered a resilient
performance in a challenging prime Central
London market which was impacted by a
number of factors including the 2016 stamp
duty changes and the result of the EU
referendum. Total revenue fell by 5% in 2016
to £33.5m (2015: £35.3m) and Underlying
Operating Profi t was £4.4m (2015: £6.9m).

Whilst Residential Sales income fell by
12% the Board believe this to be a highly
robust performance in the light of the overall
London market conditions. The Directors
are very pleased with Lettings performance
with Lettings income up 6% against 2015,
accounting for more than half of Marsh &
Parson’s total revenue.

Asset Management
Asset Management delivered a robust
performance in a shrinking market with
revenues lower by 15% compared to the
25% market fall in repossessions to 7,7005 in
2016. With a strong market share, the Asset
Management business as a counter-cyclical
business is well positioned to capitalise
on any future increase in repossession
volumes. Asset Management is developing
its corporate property management service
off ering to further enhance recurring
revenues in the Group.

Estate Agency Division
operating margin
The Estate Agency Division Underlying
Operating Margin was 10.1% in 2016
(2015: 13.2%) which resulted from the
reduction in Residential Sales volumes,
a full year overhead charge for Thomas
Morris (acquired during 2015), new Marsh
& Parsons branches opened during the
year and the national media campaign
investment in the Your Move brand which
was launched during the fi rst half of
2016. Profi ts were slightly lower in Asset
Management as cost measures taken

Regulation – Financial Services
First Complete and Pink Home Loans
(the trading name of Advance Mortgage
Funding) are both directly authorised by the
FCA in relation to the sale of mortgage, pure
protection and general insurance products.
Your Move, Reeds Rains, First2Protect,
Mortgages First and Embrace Mortgage
Services along with the LSLi subsidiaries
are all appointed representatives of First
Complete. Linear Financial Solutions is
an appointed representative of Advance
Mortgage Funding for mortgage and
insurance business and also an appointed
representative of Openwork for investment
business and Insurance First Brokers is
an appointed representative of Sesame
Limited. LSL’s Financial Services businesses
are also members of the Association of
Mortgage Intermediaries (AMI) which is
an industry representative and trade body
and the Financial Services businesses
are subject to the Financial Ombudsman
Service and contribute to the funding
of the Financial Services Compensation
Scheme through regulatory fees and
charges. LSL is participating in and
monitoring the FCA’s market study on
competition in the mortgage sector
which was launched in December 2016.

Regulation – Residential
Sales and Lettings
The Estate Agency Division’s branches
adhere to the Codes of Practice
issued by industry professional
and regulatory bodies, The Property
Ombudsman (TPO) and/or the Association
of Residential Lettings Agents (ARLA).
Membership of these bodies is in addition
to observing compliance with relevant
legislation, such as Data Protection, the
Consumer Protection Regulations, the
Consumer Rights Act, guidance material
published by relevant regulators, including
the Competition and Markets Authority
(CMA) (and its predecessor the Offi ce of
Fair Trading (OFT)), the National Trading
Standards Agency/Trading Standards
Institute (TSI), HMRC and codes published
by other relevant bodies, including the
Advertising Standards Authority (ASA).
LSL from time to time also enters into direct
dialogue with the regulators and consumer

LSL AR 2016_Sect1-3 B&C.indd 17

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We’ve been matching people and property for

over 160 years. This one’s out of our hands, though.

Advertisement from Marsh & Parson’s award winning campaign

LSL AR 2016_Sect1-3 B&C.indd 18

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Business Review
Surveying Division

+1%Revenue

2015: +3%

+4%Income per job

2015: +17%

27.1%Profi t margin

2015: 28.3%

323Number of qualifi ed surveyors

2015: 347

Financial
Revenue
Operating expenditure
Underlying Operating Profi t1

KPIs
Underlying Operating Margin (%)
Underlying Operating Margin (%)
Jobs Performed (‘000s)
Jobs Performed (‘000s)
Jobs Performed (‘000s)
Revenue from private surveys (£m)
Revenue from private surveys (£m)
Revenue from private surveys (£m)
Income per job (£)
Income per job (£)
Income per job (£)
PI Costs provision (Balance Sheet) at 31st December (£m)
Number of qualifi ed surveyors at 31st December (FTE)2

2016
£m
64.7
(47.2)
17.5

2016
27.1
27.1
318
318
318
2.3
2.3
2.3
203
203
203
20.7
20.7
20.7
323
323
323

2015
£m

64.1
(46.0)
18.1

2015

28.3
28.3
327
327
327
2.4
2.4
2.4
196
196
196
29.7
29.7
29.7
347
347
347

Total mortgage approvals (‘000s)3

1,467
1,467
1,467

1,388
1,388
1,388

Notes:

1 Refer to Note 4 for the calculation.
2 Full Time Equivalent (FTE).
3 Source: Bank of England, “Mortgage approvals for house purchases” and “Total mortgage approvals” 2016.

%
change

+1
-3
-3

%
change

-3
-3
-3
-4
-4
-4
+4
+4
+4
-30
-30
-30
-7
-7
-7

6
6
6

Surveying Division performance
Total mortgage approvals3 increased in the
year by 5.7% to 1.467m (2015: 1.388m) with a
strong fi rst half followed by a decrease in the
second half. This refl ects a strong market for
buy to let and second properties in the fi rst
quarter, prior to stamp duty changes, and a
reduction in consumer confi dence post the
EU referendum in the second half.

Surveying turnover was £64.7m (2015:
£64.1m), an increase of 1% on the
previous year with the total number of jobs
performed during the year of 318,077 (2015:
327,267) refl ecting the overall management
of the mix of jobs.

LSL continued to focus on optimising
capacity management in 2016, driving
an increase in income per job to £203,
an improvement of 4% year-on-year. As

a result LSL delivered another strong
Underlying Operating Profi t result at
£17.5m (2015: £18.1m) with an Underlying
Operating Margin of 27.1% (2015: 28.3%).

The total number of qualifi ed surveyors
(FTE) at 31st December 2016 was 323,
a reduction of 7% year-on-year. LSL’s
ongoing graduate training programme
continues to be successful and assists in
alleviating the impact of skill constraints
in the market. In 2017 LSL will continue
to focus on improving effi ciency through
optimising capacity management
supported by use of the new technology.

At 31st December 2016 the total provision
for PI Costs was £20.7m. In 2016 the Group
continued to make positive progress in
addressing historic claims and there has
been a net £1.6m exceptional release.

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We’ve been matching people and property for

over 160 years. This one’s out of our hands, though.

LSL AR 2016_Sect1-3 B&C.indd 19

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Financial Review
The key drivers of the financial performance of LSL in 2016 are summarised below

£307.8m

Group revenue
Up 2.4% – 2015: £300.6m

£34.6m

Group Underlying Operating Profit
Down 19.2% – 2015: £42.9m

£32.7m

Cash generated from operations
Down 10.6% – 2015: £36.5m

£65.4m

Group operating profit
Up 58% – 2015: £41.4m

Income statement

Revenue
Revenue increased by 2.4% to £307.8m in
the year ended 31st December 2016 (2015:
£300.6m).

Operating expenses
Operating expenses increased by 5.6% to
£275.3m (2015: £260.7m). Increases were
primarily in the Estate Agency Division as a
result of the acquisition of Group First, a full
year charge for Thomas Morris (acquired
during 2015), Marsh & Parsons branch
openings and the national media campaign
investment in the Your Move estate agency
brand during the first half of 2016.

The average number of full time equivalent
employees during the year was 4,630
(2015: 4,677).

Group Underlying Operating Profit
Group Underlying Operating Profit (as
defined in Note 5 to the Financial Statements)
decreased by 19.2% to £34.6m (2015:
£42.9m) with the Underlying Operating
Margin of 11.3% (2015: 14.3%). On a
statutory basis, the Group operating profit
increased by 58% to £65.4m (2015: £41.4m).

Exceptional items
Total exceptional costs in 2016 were £2.3m
(2015: £0.3m). The exceptional costs
related to the closure and restructure of
21 branches and the costs relating to the
technological refresh in the Surveying
Division. In 2015, exceptional costs comprised
the closure of an administration centre and
the subsequent restructuring costs incurred
which included redundancy costs.

Total exceptional gains in 2016 were
£34.5m (2015: nil) comprising of £32.9m
of gains relating to the sale of the Zoopla
shares and a £1.6m exceptional release
relating to the PI Costs provision.

PI Cost provision for PI claims and
notifications
At 31st December 2016, the total provision
for PI Costs was £20.7m. In 2016 the
Group continued to make positive progress
in addressing historic claims and there has
been a net £1.6m exceptional release.

Contingent consideration
The contingent consideration relates
primarily to the Growth Shares (C shares)
acquired by the management of Marsh &
Parsons subsequent to acquisition, and

payments due to third parties in relation
to the acquisition of LSLi and certain of
its subsidiaries between 2007 and 2016.
Payments are due between three and five
years after the acquisition completion and
depending on the profitability of those
subsidiaries in the relevant calculation
years. In 2016 contingent consideration
in the Income Statement amounted to a
credit of £3.8m (2015: £1.5m credit). This
included a credit for consideration on the
acquisition (in 2011) of Marsh & Parsons
of £1,964,000 (2015: credit £3,002,000),
a credit relating to LMS of £268,000
(2015: charge of £2,136,000) and a credit
of £1,142,000 in LSLi (2015: credit of
£611,000).

Amortisation
The amortisation charge was £3,900,000
(2015: £1,800,000). The increase was the
result of the full year impact of the acquisition
activity in 2015 and the first half 2016.

Net financial costs
Net financial costs amounted to £1.9m
(2015: £2.8m). The finance costs related
principally to interest and fees on the
revolving credit facility. Additional costs
relate to the unwinding of discounts on
provisions and contingent consideration
and interest on loan notes. The reduction in
the net financial cost results from reduced
interest charges in part due to the variation
of the 2011 loan notes.

Taxation
Following the 2015 Summer Budget the
headline rate of corporation tax in the UK
was further reduced from the current rate
of 20% to 19% effective from 1st April 2017
and further reduced to 18%, effective from
1st April 2020. The Budget announcement
in March 2016 included a further reduction
effective from 1st April 2020, when the
proposed corporation tax rate will be
lowered further still to 17%.

Following the enactment of Finance Bill
2016 in September 2016, the applicable
corporation tax rate is 17% and this is
the rate at which deferred tax has been
provided (2015: 18%). Corporation tax is
recognised at the headline UK effective rate
of 20% (2015: 20.25%).

The effective rate of tax for the year was
20.5% (2015: 21.1%). The effective tax
rate for 2016 has decreased as a result of

LSL AR 2016_Sect1-3 B&C.indd 20

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a number of factors, including reducing
the rate at which deferred tax is provided
resulting from the reduction in the headline
rate of corporation tax.

Deferred tax credited directly to other
comprehensive income is £3.8m (2015:
charge of £0.5m). This is comprised of
a credit of £5.9m and a charge of £2.1m
and relates to the disposal and revaluation
of financial assets. Income tax credited
directly to the share-based payment
reserve is £0.1m (2015: £nil).

In 2016 corporation tax payments of
£8,900,000 (2015: £5,600,000) were
made which is lower than the current year
corporation tax charge of £12,700,000
(2015: £7,800,000). This is a result of the
timing of the settlement of the corporation
tax liability on the disposal of the Zoopla
share-holding in the second half of 2016.

Basic Earnings Per Share
The Basic Earnings Per Share was 49.2
pence (2015: 29.7 pence). The Adjusted
Basic Earnings Per Share (as calculated in
Note 11 to the Financial Statements) is 25.9
pence (2015: 31.5 pence) a drop of 17.8%
which is broadly in line with the decrease
in Group Underlying Operating Profit.
The Group seeks to present a measure
of underlying performance which is not
impacted by the unevenness in profile of
exceptional gains and exceptional costs,
contingent consideration, amortisation
of intangible assets and share-based
payments. The Directors consider that
the adjustments made to exclude the
after tax effect of exceptional items,
contingent acquisition consideration
treated as remuneration, and amortisation
of acquisition intangibles provides a better
and more consistent indicator of the
Group’s underlying performance.

Balance sheet

Joint ventures and other investments
The Group has two joint ventures; a 33.3%
(2015: 33.33%) interest in TM Group,
whose principal activity is to provide
property searches, and a 50% (2015:
49.99%) interest in LMS whose principal
activity is to provide conveyancing panel
management services.

In addition LSL owns an 18.1% (2015:
18.1%) share in the Guild of Professional

Davis Tate: Gold best Medium South East winners at the Estate Agency of the Year Awards 2016 in
association with The Sunday Times and The Times.

Estate Agents (GPEA), which is a
membership organisation with a national
network of independently owned estate
agents. The carrying value of GPEA was
assessed as at 31st December 2016 and
was revalued to £3.7m (2015: £0.9m).

Capital expenditure
Total capital expenditure in the year
amounted to £4.6m (2015: £4.8m) and
an additional £1.4m (2015: £3.2m) has
been spent internally on developing new
software which has been treated as an
intangible asset.

Bank facilities
In May 2016, LSL extended its bank facility
until May 2020. The facility includes a
£100m revolving credit facility (2015: £100m)
and incorporated more favourable terms
for LSL. During the period under review,
the Group complied with all of the financial
covenants contained within the facility.

Net Bank Debt and cashflow
As at 31st December 2016 Net Bank
Debt was £20.3m (2015: £39.9m) and
Shareholders’ funds amounted to £128.8m
(2015: £107.4m) providing a balance
sheet gearing of 15.8% (2015: 37.1%). The
decrease in Net Bank Debt was primarily
the result of the sale of the Group’s entire
holding of Zoopla shares and the pause in
acquisition activity in the second half of the
year. The 2016 gearing level was 0.51 times
adjusted EBITDA1 (2015: 0.83 times). The
Group has a committed revolving credit
facility until May 2020 and in 2016 the
Group generated cash from operations of
£32.7m (2015: £36.5m).

Zoopla
Between 20th July 2016 and 31st October
2016, LSL sold its entire holding of
11.3m ordinary shares in Zoopla for total
proceeds of £36.1m at an average price
per share of £3.19. The proceeds of the
disposal were used to reduce corporate
indebtedness.

In January 2017 Zoopla (now known
as ZPG) issued the Group with 226,711
warrants in accordance with a 2016
service agreement.

Net assets
The Group’s net assets as at 31st December
2016 were £128.8m (2015: £107.4m).

Treasury and risk management
LSL has an active debt management
policy. LSL does not hold or issue
derivatives or other financial instruments
for trading purposes. Further details on the
Group’s financial commitments as well as
the Group’s treasury and risk management
policies are set out in this Report.

Post balance sheet events
There have been no post balance sheet
events to report.

International Financial Reporting
Standards (IFRS)
The Financial Statements have been
prepared under IFRS as adopted by
the EU.

1 Adjusted EBITDA is Group Underlying Operating Profit
as previously defined plus depreciation on property
plant and equipment

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Principal Risks and Uncertainties

LSL has an overall framework for management of risks and internal controls to mitigate the risks. Through this framework, the
Board, which has overall accountability and responsibility for the management of risk, on a regular basis identifies, evaluates and
manages the principal risks and uncertainties faced by LSL, areas which could adversely affect its business, operating results
and financial condition.

Development of risk appetite
During 2016, in line with the FRC’s
Guidance on ‘Risk Management, Internal
Control and Related Financial and Business
Report’ which was published in 2014 and
which integrated and replaced the FRC’s
previous guidance on risk management
and internal controls, the Board has
continued to develop LSL’s approach to risk
appetite to ensure continued compliance
with the Code and FRC guidance. The
Board has through this process expressed
the types and level of risk which it is willing
to take or accept to achieve LSL’s plans
and to support consistent, risk-informed
decision making across the Group.

The development of the risk appetite
began with the Directors approving a risk
framework policy and defining individual
risk appetite statements for LSL’s principal
risks and for key decisions made by
the Board. These statements provide
parameters within which the Board typically
expect LSL’s businesses to operate,
facilitating structured consideration of the
risk and reward trade-off for the decisions
made around how the Group conducts
business. This includes monitoring of risk
measures and identification of actions
needed to bring any specific outlying areas
of risk within target levels. During 2016,
exercises have been initiated for targeted
analysis of emerging areas of risk and
evaluation of components within individual
principal risk areas where management
adopt the lowest risk appetite tolerances.

The discussions covered a wide range
of risks, which reflect the nature of LSL’s
businesses and acknowledges that
there is not a one size fits all approach
to establishing risk parameters. During
2017, LSL will continue to develop the
framework in line with emerging best
practice, including broader development
of risk key performance indicators within
management information and triggers to be
applied in specific areas to adjust levels of
risk exposure.

The Board will seek to establish clear
parameters, whilst at the same time
fostering an environment within which

innovation and entrepreneurial activities
thrive. Where there is any proposal to
shift the Group significantly closer to or
outside agreed risk parameters, this will be
discussed and subject to Board approval
before commencing any activities to ensure
that appropriate mitigation controls are put
into place.

Ongoing evolution of the risk management
framework is carried out as part of an on-
going cycle of continual improvement, and
remains a key priority for the Board in 2017.

Developing the financial
viability statement
In developing the financial viability
statement, it was determined that a three
year period, ending on 31st December 2019,
should be used, as this is consistent with
Group’s budget and strategic planning
cycles and is supported by the Group’s
funding arrangements, which expire in
May 2020.

The Executive Committee reviewed LSL’s
principal risks, and considered which of
these risks might threaten the Group’s
viability.

A number of severe but plausible scenarios
were considered and modelled in detail
with input from a cross functional group of
senior managers, including representatives
from the finance teams.

The main focus of the scenario modelling
related to the impact of a significant
downturn in the property market as
occurred in the high risk lending period
of 2004 to 2008. Modelling included
the plans LSL put in place during that
recessionary period. The skills and many of
the personnel with experience to manage
through such a scenario remain within the
business which has helped this process
and gives a degree of confidence to
manage through a similar future scenario.

Detailed assumptions for each scenario
were built up and modelled by month
across the three year period. The models
measured the downside impact on revenue
and the management action which would
be taken to retain cash reserves and

maintain the operating capacity of the
business as a result of the stress scenarios.

Assumptions were also made for the
potential growth of LSL’s recurring income
and counter-cyclical businesses, notably
Lettings and Asset Management, and the
extent to which some activities, such as
Lettings, tend to be less affected through
the cycle. The modelling and assumptions
took account of the broad range of services
across a broad geography which allows
some protection from the impact of stress
scenarios.

The Audit Committee oversaw the process
by which the Directors reviewed and
discussed the assessment undertaken by
the Management Team in proposing the
viability statement.

The Directors’ financial viability statement is
contained in the Report of the Directors.

Risk management and internal
controls framework
LSL’s risk management and internal
controls framework for 2016 included:

a. ownership of the risk management

and internal controls framework by the
Board, including a risk framework policy,
supported by the Group Chief Financial
Officer, the Company Secretary, Head
of Risk and Internal Audit and the Group
Financial Controller;

b. a network of risk owners in each of LSL’s
businesses with specific responsibilities
relating to risk management and internal
controls;

c. the documentation and monitoring
of risks are recorded and managed
through standardised risk registers
which undergo regular reviews and
scrutiny by local boards and the Head of
Risk and Internal Audit;

d. the Board regularly identifies, reviews

and evaluates the principal risks which
may impact the Group as part of the
planning and reporting cycle to ensure
that such risks are identified, monitored
and mitigated;

e. the development and application of
LSL’s risk appetite statement and

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associated framework (for further details
on steps taken during the year, see the
Audit Committee Report); and

Group, which is a matter of judgment of
the Board and has been supported by the
Management Team.

f. reporting by the Chairman of the Audit

Committee to the Board on any matters
which have arisen from the Audit
Committee’s review of the way in which
the risk management and internal control
framework has been applied together
with any breakdowns in, or exceptions to,
these procedures.

As stated above, LSL has in place a
Group-wide risk appetite statement and risk
framework policy which will continue to be
developed in 2017.

The risk framework includes the following:

a. a risk framework policy;

b. determination of risk appetite and

management or mitigation of risks in line
with risk appetite tolerances;

c. assessment of prospects and viability;

d. review of effectiveness of the risk
management and internal control
systems; and

e. going concern confirmation (for LSL’s

going concern disclosure see the Report
of the Directors).

During the year, the Directors carried
out a robust assessment of the principal
risks facing the Group, including those
that threaten the business model, future
performance, solvency or liquidity. The
Directors believe that the assessment which
has been completed is appropriate to the
complexity, size and circumstances of the

The Directors also carried out a risk appetite
assessment exercise which involved the
evaluation of continually evolving aspects
of risk management. During 2016, this
included the capturing of anticipated
impacts following the EU referendum on
the residential housing market and the
articulation of established ‘conduct risk’
routines used to support the delivery of
appropriate customer outcomes. These
aspects are included in the principal risks
and uncertainties summarised below.

The identified risks may change over
time due to changes in business models,
performance, strategy, operational
processes and the stage of development
of the Group in its business cycle as well as
with changes in the external environment.
This robust assessment is focused on the
principal risks and it differs from the review
of the effectiveness of the systems of risk
management and internal controls.

In accordance with the requirements of
the Code this Report includes descriptions
of principal risks together with a high
level explanation of how they are being
managed or mitigated. This includes clear
descriptions of the risks together with an
evaluation of the likelihood of a typical risk
event crystallising and its possible impact.
Mitigating steps and any significant changes
to specific areas of risk are also referred to
within the tabular summary.

As noted above, this robust analysis of
principal risks has also contributed to the
Group’s viability statement which is included
within the Report of the Directors. The
Directors have also considered the impact
if risks coincide, namely a combination
of non-principal risks could potentially
represent a single compound principal risk.

The Group also faces other risks which,
although important and subject to
regular review, have been assessed as
less significant and are not listed in this
statement. This may include some risks
which are not currently known to the Group
or that LSL currently deems as immaterial,
or were included in previous Annual Report
and Accounts and through changes in
external factors and careful management,
are no longer deemed to be as material to
the Group as a whole.

However, these risks may individually or
cumulatively also have a material adverse
effect together with other risk factors
which are beyond the direct control of LSL,
and may have a material adverse impact
on LSL’s business, results of operations
and/or financial condition. The risk
management framework and procedures
in place can only provide reasonable but
not absolute assurance that the principal
risks and uncertainties are managed to an
acceptable level.

Further information relating to how LSL
managed these risks and uncertainties
during 2016 is set out in the Audit Committee
Report (Internal Controls) of this Report.

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Principal Risks and Uncertainties

Risk

Strategic:

UK housing market

New UK housing
market entrants

Description

Mitigation

Group performance is intrinsically linked
to the overall performance of the UK
housing market (including subsets – e.g.
prime Central London). The market is
also impacted by changes in the global
political and economic environments
(e.g. EU referendum outcome).

Traditional business models for property
services are exposed increasingly to
new business models and technological
advancements (e.g. online/hybrid estate
agents, automated valuation models and
automated financial services operating
models).

• Daily, weekly and monthly monitoring of trading and market

performance data.

• Market share, product mix and segmentation initiatives.
• Development of counter-cyclical income and recurring revenue

income streams.

• Responsive investment and cost control measures during the

housing market cycle.

• Investment in teams to deliver strategic projects.
• Balanced UK-wide geographical spread.
• Monitoring of wider macro-economic and political developments.

• Competitor and industry benchmarking.
• Development of strategies in response to market disrupters.
• External consultative support as necessary.
• Monitoring of potential acquisitions and joint venture opportunities.
• Service delivery enhancements and experimentation.
• Infrastructure investment, upgrading and consolidation of core

operating systems.
• Marketing initiatives.
• Staff incentive schemes.

Acquisitions and
growth initiatives

Realising appropriate targets for
acquisition and major project initiatives,
including delivery of appraisals, due
diligence and integration/implementation
requirements.

• Defined pre and post-acquisition reporting to the Board and Audit

Committee.

• Structured authority levels.
• Responsive flexing of risk appetite during the housing market cycle.
• Flexible resource pool to support acquisition and integration

Sales/distribution:

Professional services

Exposure to major PI claims arising from
any lapses in surveying and valuation
practices.

Client contracts

The performance of the Estate
Agency and Surveying businesses are
dependent on securing and retaining
key contracts (e.g. lenders, portfolio
landlords and house builders).

activities teams.

• External consultative support as necessary.
• Established integration planning methodology.
• Post-acquisition and post-implementation reviews.
• Risk and Internal Audit engagements.

• Robust framework and monitoring routines to maintain valuation

accuracy.

• Dedicated surveying risk team.
• Timely data capture of all claims and associated trends.
• Utilisation of technology to monitor valuation trends and trigger alerts.
• Risk and Internal Audit reviews.
• Experienced claims handling personnel supported by legal experts.
• Culture promoting effective sales conduct and open lines of

communication with clients.

• Board-level authorities for PI claims, settlement payments and

governance of underlying claims handling and accounting
processes.

• Customer outcome focused forums and initiatives.
• Designated senior members of staff with responsibility for

relationship management.

• Ongoing investment in resources, technology and service standards

to ensure LSL has the capacity to meet service level demands.

• Targeted marketing and training events.
• Monitoring of client dependency and compliance with contractual

requirements.

• Robust control framework supporting the risk profiling of
prospective clients, contract renewals and the quality of
professional services.

• Dedicated in-house legal services and claims Management Teams.
• Risk & Internal Audit reviews.

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Risk

Operations:

Information technology
infrastructure

Description

Mitigation

The Group has varied operations which
require a robust IT infrastructure. The IT
environment needs to remain adaptable
to support growth initiatives, harness
technological advancements and counter
business continuity threats, including
malicious and cyber related attacks.

• Board level IT governance, policies and initiatives.
• Focus on innovation within the Group’s strategy.
• Dedicated in-house IT teams.
• Maintenance of infrastructure to maintain effective service delivery.
• Ongoing IT investment and development programme.
• Implementable business continuity and disaster recovery solutions.
• Monitoring of compliance with relevant contractual and regulatory

Information security

Group operations involve the processing
of high volumes of personal data, with
potential for unintended data loss and
exposure to increasing levels of external
cyber-crime.

requirements.

• Inter-Group IT forums.
• External consultative support as necessary.
• Risk and Internal Audit reviews.

• LSL Information Security and Governance Group and Group IT

Director in place.

• Dedicated LSL Information Security personnel.
• Group data protection policies and training.
• Tracking of data assets/data sharing, in line with authority levels.
• Penetration testing programme.
• Benchmarking against best practice standards – e.g. ISO27001.
• Implementation of regulatory changes – (e.g. General Data

Protection Regulation).

• Second and third-line risk-based reviews.

Regulatory and
compliance

Relationships with regulators and
compliance with legal and regulatory
requirements. Any compliance breaches
could result in sanctions and reputational
damage (e.g. prosecutions or fines).

Regulatory and compliance risk extends
to oversight of standards adopted by
business partners (e.g. franchises,
appointed representatives, joint ventures
and minority investments).

The market and business operations
are also impacted by regulatory reforms
(e.g. Housing White Paper) which may
have an effect on Group revenue and
expenditures.

Regulatory costs, fees and charges
continue to grow due to the rising funding
requirements of the Financial Services
Compensation Scheme (FSCS).

• Top-down culture focused on fairness, transparency and successful

customer outcomes.

• Open dialogue with regulators and monitoring of emerging

developments and regulatory reforms.

• Group risk framework policy incorporating a ‘three-lines of defence’

model to track compliance with regulations.

• Group policies including ethics (e.g. whistleblowing structures and

anti-fraud and anti-bribery policies) and employee welfare.

• Group-wide health and safety arrangements to ensure welfare of

employees and visitors to Group premises.

• Group-level forums with regulatory focus and oversight (e.g.

Financial Services Management Committee, Financial Services Risk
Committee, Financial Services Management Committee, Financial
Services Risk Committee, and Information Security and
Governance Group).

• Dedicated compliance teams in higher risk/regulated functions.
• Evolution of IT systems to strengthen oversight routines.
• Responsive complaints tracking of any emerging themes.
• In-house legal services team, with external legal support when needed.
• Group Risk and Internal Audit reviews.

People:

Employees

Securing and retaining key strategic
populations and controlling attrition in
key business critical areas, ensuring
the effective management of personnel
standards across varied Group
businesses.

• Oversight by LSL Remuneration and Nominations Committees.
• Group remuneration policies and incentive schemes to retain key

strategic populations.

• Regular benchmarking and appraisals of senior management.
• Succession planning reviews and targeted reviews in some areas.
• Dedicated in-house recruitment team.
• Targeted retention and recruitment initiatives.
• Staff surveys and Group HR initiatives to focus on attrition, improve

staff morale, relieve areas of pressure and improve operational
efficiencies.

• Group-wide HR IT systems.
• Monitoring of statutory requirements and developments.
• Employee policies and monitoring framework (e.g. health & safety).
• Culture of transparency, clear Group policies and whistleblowing

procedures to enable staff to confidentially raise concerns.

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Corporate Social Responsibility

Reeds Rains Easter competition

The Board has overall responsibility for establishing the Group’s Corporate Social Responsibility (CSR) statement and associated
policies with the Group Chief Financial Officer, taking individual responsibility for the creation, operation and implementation of
the Group’s CSR statement and strategy.

LSL believes that it is necessary to support responsibly-grounded business decision making, to consider the broad impact of corporate
actions on people, communities, and the environment. The growing awareness of and attention to social responsibility issues has many
benefits for corporations such as LSL and by way of this statement, LSL recognises that its employees are central to the Group meeting
its CSR, environmental and community investment objectives. Guidelines, progress and achievements are communicated to employees
at regular intervals through bulletins, intranet sites and notice boards as appropriate (including the Group HR online service systems).

LSL’s focus is on actions that the Group can take over and above its legal requirements to address its competitive interests of the wider
society and underpins all other internal policies that the Group adheres to. LSL actively ensures that its businesses are compliant and
proactive in respect of legislation, in accordance with its employees, customers, suppliers and other stakeholders’ interests.

LSL believes that the objective of providing goods and services needed or desired by members of society while returning a profit to
Shareholders can be – and should be – fully compatible with addressing social responsibility concerns and vice versa. For example, LSL’s
environmental policy and performance demonstrates its commitment to the reduction of energy consumption and the positive impact that
this has had both on the environment and in terms of cost reduction to the Group’s businesses.

The Board recognises that it is important that Group companies operate in a responsible way. LSL’s stakeholders expect LSL to take
issues into account and LSL in turn has a duty to demonstrate to them how it is living up to this expectation. This can often mean
balancing competing demands, which are placed on LSL as a public company and as a property services group.

This section of the Report details how LSL seeks to manage these interests.

LSL’s objectives extend to its relationships with customers and suppliers, and all Group companies will seek to be honest and fair in these
relationships. Further, ethics, hospitality and conflicts policies are in place to govern these relationships.

During 2016, LSL began putting in place arrangements to ensure compliance with the Modern Slavery Act 2015 and is currently
developing its statement which is required to be disclosed in June 2017. This work includes assessments and due diligence of key
suppliers for relevant Group companies in addition to updating its employee policies.

LSL has also been monitoring the implementation of the payment practices reforms which will apply to LSL business during 2017 with
reporting requirements commencing in July 2018.

As part of LSL’s regular risk assessment procedures, the Board takes account of the significance of environmental, social and governance
(ESG) matters to the business of the Group and in its decision making. The Board has identified and assessed the significant ESG risks
to LSL’s short and long-term value, as well as the opportunities to enhance value that may arise from an appropriate response. The
Board receives information to make this assessment and that account is taken of ESG matters in the training of Directors. The Board has

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also ensured that LSL has in place effective systems for managing and mitigating significant risks, which, where relevant, incorporate
performance management systems and appropriate remuneration incentives.

LSL’s people
LSL recognises that its people are a valuable asset and is committed to providing a working environment in which its employees can
develop to achieve their full potential with opportunities for both professional and personal development.

By creating such an environment, LSL believes that this will enable the retention and recruitment of the right people to work at every level
throughout the Group. An essential part of this strategy is to encourage and promote effective communication with all employees which is
achieved through employee opinion surveys. This also ensures that LSL, in its decision making, takes into account its employees views.
For further details of the employee survey arrangements, see Communication (Employees) below.

LSL’s approach
LSL’s aim is to be recognised by existing and potential future employees as a responsible employer that values its people and the
contribution they make both in the business and in the wider community. LSL recognises that its market leading positions in Estate
Agency and Surveying are achieved by the quality and service provided by the Group’s employees. LSL’s employees are its key
differentiator and it is this principle that guides the Board’s decision making on how LSL approaches the management of its people.

Communication
Employees:
LSL ensures that employees are kept informed of Group affairs via information distributed by post, e-mail, handbooks or the various intranet
sites. LSL values employee feedback and all Group employees are encouraged to discuss strategic, operational and business issues within
their teams and with their Management Teams.

In addition, the Board receives employee feedback via employee opinion surveys which operate across all parts of the Group businesses
on an annual basis. The data that is captured is presented to the Board as part of a regular review of employee matters which focuses
on understanding the issues facing our employees. Key performance indicators such as labour turnover and responses to key questions
are also monitored to measure staff morale.

Each year LSL engages an external consultant to assist with the annual employee surveys and this engagement allows LSL to not only
generate an accurate picture of engagement across the Group, it also allows LSL to assess the results and feedback received against
similar organisations using the benchmarking data retained by the agency. As in previous years, the 2016 survey covered all aspects of the
working environment including training, careers, performance and Company communications together with questions on the effectiveness
of Company management and leadership. The response from employees to the survey was very positive with 3,574 (72%) (2015: 3,578
(71%)) returns received.

The survey results provide the Board with insight into what factors concern and motivate the Group’s employees and contribute to action
plans and/or focus groups across the Group. The employee survey process is continually evaluated and developed to maximise the validity
and reliability of the data that is captured. Further, the process will be repeated again in 2017 as LSL remains committed to the continual
development and improvement of employee engagement across the Group. On strategic matters, LSL recognises and consults Unite.

Customers:
In relation to its customers, all businesses regularly seek feedback from customers. This feedback is obtained in a range of ways, including
relationship management meetings, formal questionnaires, mystery shopping exercises and consumer focus groups. This feedback is
taken into account in LSL’s decision making processes and in particular in the development of its services to customers. During 2016, LSL
conducted extensive consumer research and market research ahead of exploring and evaluating in 2017 LSL’s digital opportunities.

Equal opportunities
LSL promotes equal opportunities in employment, recognising that equality and diversity is a vital part in its success and growth. The
Group recruitment, training and selection processes seek to appoint the best candidates based on suitability for the job and to treat all
employees and applicants fairly regardless of race, sex, marital status, nationality, ethnic origin, age, disability, religious belief or sexual
orientation, and to ensure that no individuals suffer harassment or intimidation.

Specific employment policies exist which employees are required to observe and over which the Group Chief Executive Officer has overall
responsibility with some policies being submitted annually for review and approval by the Board. Compliance with legislation and Group
policies is audited by the Group’s Risk and Internal Audit team alongside regular reporting to the Board, which includes indicators such as
staff turnover.

Gender diversity:
During 2016, LSL has remained committed to diversity and equal pay and LSL is monitoring the requirements relating to new gender pay
reporting requirements, and has also participated in the Government consultation. During 2017, LSL will ensure full compliance ahead of
the reporting requirements coming into force in 2018.

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Corporate Social Responsibility

Disability:
LSL has in place policies and procedures to achieve its objective that where appropriate, upon employment reasonable adjustments will
be made to accommodate disabled persons wherever the requirements of the organisation will allow and if applications for employment
are received from suitable individuals. If existing employees become disabled every reasonable eff ort is also made to ensure that their
employment with LSL can continue on a worthwhile basis with career opportunities available to them.

Employee key performance indicators
The Group uses a number of key performance indicators to measure its progress during the year, including employee turnover and the
makeup of its workforce by gender.

Total employees at (31st December)
Total employee turnover percentage (%)*

*Data excludes forced leavers.

Breakdown by gender
Male
Female

2016
4,990
30.8

2015

2014

2013

2012

5,181
28.5

5,222 5,299
26.4

27.8

4,754
26.7

2016
2,206
2,784

2015

2014

2013

2012

2,285
2,896

2,316
2,906

2,318
2,981

2,052
2,702

In accordance with reporting requirements, the gender split for the Board, senior Management Team and Group employees for 2016 and
2015 is as follows:

Directors
Senior Management Team
Group employees

Female

2015
2
15
2,899

2016

2
16
2,766

Male

2015
7
57
2,282

2016

6
61
2,139

Employee training
LSL’s businesses place strong emphasis on the quality of service they provide to customers with employees (and where appropriate
consultants) undergoing appropriate training. During 2016, LSL continued its commitment to recruit, develop and invest in colleagues. The
Group’s approach is to prioritise colleague learning and development to strengthen the businesses and to ensure the Group’s continued
success. Examples of this approach to training are detailed below.

Surveying and Valuation Services:
There are a total of 87 graduates in the business, the majority of whom have achieved AssocRICS qualifi cations. There are 20 still working
towards the competency levels who are on schedule to qualify during 2017. All surveyors are regulated by the RICS (Royal Institute of
Chartered Surveyors) and continuing professional development (CPD) is a commitment by members to continually update their skills
and knowledge in order to remain professionally competent. All RICS professionals must undertake and record online a minimum of 20
hours of CPD activity each calendar year. This is undertaken through a variety of methods ranging from distance learning, online modules
through the Learning Management System, regional workshops and an annual conference.

Estate Agency and Related Services:
Across the Group’s Estate Agency Division’s branches, employees adhere to the codes of practice issued by The Property Ombudsman
(TPO) and/or the Association of Residential Lettings Agents (ARLA). This is in addition to observing compliance with relevant legislation,
such as Data Protection, the Consumer Protection Regulations, guidance material published by relevant regulators, including the
Competition and Markets Authority (CMA) (and its predecessor the Offi ce of Fair Trading (OFT)), the National Trading Standards Agency/
Trading Standards Institute (TSI), HMRC and codes published by other relevant bodies, including the Advertising Standards Authority
(ASA). LSL from time to time also enters into direct dialogue with the regulators and consumer groups. LSL is on behalf of all its Estate
Agency businesses entering into a primary authority agreement with York Trading Standards.

During 2016 and now in 2017, the Group is monitoring the Government’s review of the housing market, which is set out in the
Government’s Housing White Paper, published in February 2017 and is considering the impact of these reforms.

The Group is also reviewing its processes and putting in place arrangements to ensure compliance with the new data protection
requirements ahead of the introduction of the General Data Protection Regulations in May 2018.

LSL monitors all relevant legislative changes aff ecting its businesses and keeps under review its training programmes to ensure that
employees receive specially designed training courses, with the quality of service monitored on a regular basis.

LSL’s ‘Talent Development Team’ delivered training to a total of 3,349 employees during 2016, equating to the delivery of 6,179 training
days. 2016 saw the implementation of a number of eLearning packages on ‘Learning Matters’, LSL’s online eLearning system, which

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allows Group employees to complete eLearning training packages for compliance and regulatory purposes, and as a result of this system,
LSL is able to monitor and report on compliance training completion rates in real-time.

Throughout the year a number of new learning initiatives were implemented including the launch of the Advanced Leadership Pathway –
an accredited development programme for existing and future managers, new apprenticeship programmes, career pathways and various
CPD workshops to support the development of new and tenured employees.

By fostering an inclusion culture, LSL are committed to diversity and equal pay, and recognise that many of its employees do not progress
at the same rate. Therefore LSL have identifi ed some of the main barriers to progression and have developed a plan to support minority
groups. This includes the implementation of new training programmes which have started with both unconscious bias and assertiveness training.

In relation to LSL’s Financial Services business, the FCA is responsible for the conduct of fi rms authorised by the Financial Services
and Markets Act 2000 (FSMA). LSL’s Financial Services businesses include two authorised fi rms, which operate broker networks that
include other Group companies acting as their appointed representatives. LSL’s Financial Services businesses are also members of
the Association of Mortgage Intermediaries which is an industry representative body and are subject to the Financial Ombudsman
Service and also contribute to the funding of the Financial Services Compensation Scheme through regulatory fees and charges. LSL is
participating in and monitoring the FCA’s market study on competition in the mortgage sector which was launched in December 2016.

The Financial Services companies are responsible for the training and compliance arrangements of the majority of Financial Services
business conducted by Group companies and the business place strong emphasis on the quality of service provided to customers and
as part of the compliance arrangements. All employees involved in the Financial Services businesses receive appropriate and relevant
training. In particular, all advisers complete a specially designed training programme which is supplemented by eff ective supervision,
regular monitoring and regular refresher training sessions.

During 2016, the Group training expenditure was:

Division
Estate Agency and Related Services (£)
Surveying and Valuation Services (£)
Total expenditure (£)

This includes in-house training costs of £1,164,440 (2015: £1,557,807).

Expenditure 2016
1,406,325
344,218
1,750,543

Expenditure 2015

1,489,182
400,026
1,889,208

Health, safety and welfare
LSL places great importance on the health, safety and welfare of its employees. Regular training is supported by policies, together with
Group standards and procedures, which aim to identify and remove any hazardous areas, reduce material risks of fi re and accidents or
injuries to employees and visitors and, in conjunction with its HR policies, manage workplace stress levels.

To this end, LSL makes every reasonable eff ort to provide safe and healthy working conditions in all offi ces and branches. Similarly, it is
the duty of all employees to exercise responsibility and to do everything to prevent injury to themselves and to others.

Separate health and safety policies exist which employees are required to observe and the Group Chief Financial Offi cer has overall
responsibility for this. Compliance with legislation and Group policies is audited by the Group’s Risk and Internal Audit team with regular
reporting to the Board, which includes indicators such as accident numbers.

Environmental issues
LSL recognises that the environment has an intrinsic value, which is central to the quality of life and underpins economic development.
As part of this understanding, LSL have assessed the main areas in which it is able to eff ect the largest reductions in the Group’s overall
environmental impact.

The Group’s Environmental Policy is contained within the CSR Policy, which the Group Chief Financial Offi cer, has overall responsibility for.
Compliance with aspects of the CSR Policy is audited by the Group’s Risk and Internal Audit team with regular reporting to the Board.

Energy effi ciency strategy (including ESOS) and greenhouse gas emissions reporting)
During 2015, LSL undertook a number of energy audits to identify opportunities for energy and emissions reductions and to ensure
compliance to the new ESOS Regulations 2014 and Article 8 of the EU Energy Effi ciency Directive, which came into force in the UK in
July 2014.

The aim of ESOS is to aid organisations in its identifi cation of energy effi cient savings to support and increase good energy management
and it is part of the Government’s climate change initiative. The results of the audit were submitted to the Environment Agency in
December 2015 and LSL’s next audit is scheduled to take place in 2019.

The 2015 audit which was completed by a Lead ESOS Assessor, involved a review of energy consumption data and visits to selected
branches and offi ces.

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Corporate Social Responsibility

The recommendations arising from the audit, which were reported to the Board have contributed to a Group-wide energy strategy. As a
result, the following environmental projects were adopted in 2016 and will be reported against during 2017:

1. Energy monitoring – Where installation is practical, continue to build on the existing programme of implementation of smart meters

through the remainder of the Group’s premises estate.

2. Lighting – Installation of low energy and LED lighting in branches and offi ces, replacing ineffi cient fl uorescent tubes and halogen lamps.

3. Heating, ventilation and air conditioning – Ensuring, through annual servicing, the eff ectiveness of temperature controls on fi xed air
conditioning systems. In terms of new installations, heating and air conditioning, ensuring these are in accordance with the Group
ESOS strategy in terms of producing energy savings and reducing CO2 emissions.

4. Building management – Undertake reviews at key sites to optimise system installations to improve the working environment for Group

employees and generate savings on energy costs.

5. Water – Investigate the opportunities which may be available through market deregulation, and what further advantages this could

present through the installation of meters to better manage usage and costs.

6. Transport – Consider improvements which may be available via the introduction of telematics producing data to allow for the
monitoring of fuel consumption, driver fuel performance, alongside off ering lower emission fl eet vehicles. Additionally, further
measures introduced to reduce CO2 emissions include the use of telephone conference facilities and also the use of online web-
based training programmes.

The next ESOS audit is due to take place during 2019.

The Group is also reviewing the Non Domestic Private Rented Property Minimum Standard Guidance published in February 2017 by
the Department for Business, Energy & Industrial Strategy. The Guidance relates to Part Three of the Energy Effi ciency (Private Rented
Property) (England and Wales) Regulations 2015 and relates to non domestic property.

Greenhouse gas emissions:
This section of the Report has been prepared in accordance with LSL’s regulatory obligation to report greenhouse gas emissions
pursuant to Section 7 of The Companies Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.

During the 2015/16 reporting period, LSL emitted a total of 7,599 tCO2e from fuel combustion and operation of LSL’s facilities (Scope 1
direct), and electricity purchased for LSL’s own use (Scope 2 indirect). This is equal to 24 tCO2e per £m of revenue or 1.69 tCO2e per full
time equivalent employee.

The table below shows LSL’s tCO2e emissions for the period 1st October – 30th September for the years 2016, 2015, 2014 and 2013.

(tCO2e)
Combustion of fuel and operation of facilities (Scope 1)
Electricity, heat, steam and cooling purchased for our own use (Scope 2)
Total Scope 1 and 2
tCO2e per full time equivalent employee
tCO2e per £m revenue

2015/ 2016
4,046
3,553
7,599
1.69
24

2014/2015

2013/2014

2012/2013

4,325
4,236
8,561
1.89
29

4,781
4,834
9,614
2.1
34

3,728
5,436
9,164
2
37

As the table demonstrates, since 2014 LSL’s absolute emissions have decreased by 21%. This reduction is principally due to the Group’s
programme of continual branch refurbishment across the Estate Agency businesses to improve effi ciency and modernise fi ttings, as well
as the reduction in average FTE employees across the Group over the year and the disposal of a number of sites.

Greenhouse gas reporting methodology:
The Group quantifi es and reports on its organisational greenhouse gas emissions according to Defra’s Environmental Reporting
Guidelines and has utilised the UK Government 2016 Conversion Factors for Company Reporting in order to calculate CO2 equivalent
emissions from corresponding activity data. LSL has also utilised data required for compliance with the CRC Energy Effi ciency Scheme
and the ESOS.

Greenhouse gas reporting boundaries and limitations:
The emission sources included within this Report fall within the consolidated Financial Statement. LSL does not have responsibility for
any emissions sources that are not included within the consolidated Financial Statement. LSL has not to date calculated the Group’s
fugitive refrigerants from air-conditioning equipment as these are considered to be de minimis, however, LSL may look to quantify and
report on emissions from this source in future years.

The greenhouse gas sources that constitute LSL’s operational boundary for the 2015/2016 reporting period are:

• Scope 1: Natural gas combustion within boilers and road fuel combustion within vehicles

• Scope 2: Purchased electricity consumption for our own use

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Greenhouse gas reporting assumptions and estimations:
In some cases, missing data has been estimated using either extrapolation of available data from the reporting period or data from
2014/2015 as a proxy.

Social and community interests (including human rights, ethical issues and modern slavery)
LSL’s social, community interests (which includes the promotion of human rights and ethical issues) objective is to establish a common
and coherent approach among Group businesses and to support investment in the communities in which they operate. Group
companies are sensitive to local communities’ cultural, social and economic needs. LSL is committed to acting responsibly wherever it
operates and to engaging with stakeholders to manage the social, economic and environmental impact of all Group activities.

LSL’s business has a direct impact on the local communities in which it operates and the Board recognises that good relations with local
communities are fundamental to LSL’s sustained success. Working in partnership with communities over a sustained period of time is
the most effective way to achieve objectives and lasting change.

LSL supports its businesses in achieving these objectives by encouraging Group businesses to:

1. make donations both to local and national charities;

2. support and organise fundraising events including supporting charities and local community initiatives selected by Group companies; and

3. support employees in their personal fundraising ambitions.

Further details of some specific charitable initiatives are set out below.

LSL’s approach to the promotion of human rights and ethical issues is contained within the Group’s HR policies, which includes the
Group’s Combined Ethics Policy, which is presented to the Board for annual review and approval. While all Group employees are made
aware of the policy, the Risk and Internal Audit Team will audit awareness and compliance, with the findings reported to the Board.

During 2016 and into 2017, LSL has been reviewing its operations to develop its policy on the prevention of modern slavery ahead of
its reporting obligations which commence in June 2017. This has included assessments and due diligence of key suppliers for relevant
Group companies in addition to updating employee policies.

LSL has also been monitoring the implementation of the payment practices reforms which will apply to LSL business during 2017 with
reporting requirements commencing in July 2018.

Charitable donations
Workplace giving:
LSL has implemented the ‘Charitable Giving’ initiative and all Group employees have been invited to participate. The initiative was
launched in October 2010 and in 2016 LSL employees raised over £11,000. Over 122 employees participate in the scheme, which
donates to a range of charities.

LSL makes it possible for employees to make regular donations via the payroll system to a charity or charities of their choice on a tax
free basis. The tax free element means that the charity benefits by receiving a higher amount. Further information can be found at: www.
chartitablegiving.co.uk/payroll/payroll-giving.htm

Estate Agency:
LSL’s Estate Agency Division continues to encourage and promote individuals’ fundraising activities in all brands’ local communities
and employees have raised money for a wide range of causes in 2016, from national and international organisations such as Cancer
Research (www.camcerresearchuk.org), the NSPCC (www.nspcc.org.uk), Save the Children (www.savethechildren.org.uk), Agents
Giving (www.agentsgiving.org) and Action This Day (www.actionthisday.org) to very specific local needs such as a new Faxitron
machine for Blackpool Victoria Hospital, funds for the Adult Cystic Fibrosis Centre at Wythenshawe Hospital and Christmas Stockings
for Jimmy’s Homeless Centre in Cambridge. Reeds Rains also sponsored Bauer Radio’s Cash for Kids initiative at Metro Radio stations
in the North East and following the success of this signed up to be headline sponsor in 2017 for the whole event across eight radio stations.

Surveying:
Within the Surveying Division, during 2016 the national charity, Coming Home was supported. Coming Home provides specially adapted
housing for ex-service men and women. Support was also provided to a number of different charities (national and local) based on
individual employee request, including but not limited to:

• Teenage Cancer Trust www.teenagecancertrust.org • Northampton Swimming Club www.northamptonswimming.com • MacMillan
Cancer www.macmillan.org.uk • Royal British Legion www.britishlegion.org.uk • Cynthia Spencer Hospice www.cynthiaspencer.org.uk
• Breast Cancer Now www.breastcancernow.org • Cransley Hospice www.cransleyhospice.org.uk.

Tax strategy
LSL will ensure compliance with the provisions of Schedule 19 to the Finance Act 2016 by publishing its tax strategy in 2017. This will
build on LSL’s existing transparency in relation to taxation.

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The Board

1. David Stewart
Non Executive Director
David was appointed as an independent
Non Executive Director on 1st May 2015.
He is Chairman of the Audit Committee
and a member of LSL’s Nominations and
Remuneration Committees. David has
significant experience in strategy, operations,
sales and marketing, finance and governance,
particularly in the financial services sector. On
6th February 2017, he became Chairman of the
ENRA Group of Companies, and he also sits as
a Non Executive Director on the boards of M&S
Bank and HSBC Private Bank (UK). He was
previously Chief Executive of Coventry Building
Society and before that, he held the positions
of Finance Director and Operations Director.
David, originally from Manchester, studied
economics and politics at Warwick University
and qualified as a chartered accountant with
Peat Marwick (KPMG).

2. Simon Embley
Non Executive Director and Chairman
Simon was appointed Non Executive Chairman
on 1st January 2015, having previously held
the positions of Deputy Chairman and Group
Chief Executive Officer. He became the Group
Chief Executive Officer of LSL at the time of the
management buy-out of e.surv and Your Move
from Aviva (formerly Norwich Union Life) in
2004. Prior to the management buy-out, Simon

was responsible for the strategic direction
of these companies, and subsequent to the
management buy-out Simon has overseen
and been responsible for the turnaround of
the initial Group from a heavily loss-making
business to the successful business it is today.
Simon’s other directorships are limited to a
small estate management company, Road to
Health (a healthcare provider) and he is Non
Executive Chairman at Global Ventures (a
tenant deposit protection scheme).

3. Bill Shannon
Non Executive Director, Deputy Chairman,
Senior Independent Director, and Chairman
of the Remuneration Committee and
Nominations Committee
Bill was appointed as an independent Non
Executive Director and the Chairman of the
Remuneration Committee on 7th January 2014
and on 1st January 2015, he took on the roles
of Deputy Chairman, Senior Independent
Director and Chairman of the Nominations
Committee. He is also a member of LSL’s Audit
Committee. Bill has significant PLC board
experience in strategy, operations, finance and
governance in the consumer, financial services,
residential and commercial property sectors.
He is currently Non Executive Chairman of St
Modwen Properties plc and Non Executive
Director of Johnson Service Group plc. He
was previously at Whitbread Group plc from

1974 and between 1994 and 2004, he was
the Divisional Managing Director. He has also
served as Non Executive Chairman of Aegon
UK plc and Non Executive Director of Rank
Group plc, Barratt Developments plc, and
Matalan plc.

4. Kumsal Bayazit Besson
Non Executive Director
Kumsal was appointed as an independent
Non Executive Director on 1st September 2015
and is also a member of LSL’s Nominations,
Remuneration and Audit Committees.
Kumsal has significant experience in strategy,
technology, operations and sales and
marketing, particularly in the professional
information solutions sector. This includes her
current appointment as a Regional President,
Europe at Reeds Exhibitions which is part
of the RELX Group plc (formerly the Reed
Elsevier Group plc). Kumsal has previously
held a number of executive technology and
digital strategic roles including appointments as
Chief Strategy Officer for RELX Group, as the
Executive Vice President of Global Strategy and
Business Development for LexisNexis (part of
RELX Group plc) and as a consultant for Bain
& Co in New York, Johannesburg, Sydney, San
Francisco and Los Angeles. Kumsal holds an
MBA from Harvard Business School and a BA
in Economics from the University of California
at Berkeley.

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5. Ian Crabb
Executive Director,
Group Chief Executive Officer
Ian was appointed Group Chief Executive Officer
on 9th September 2013 and he has primary
responsibility for the performance, strategy
and development of LSL. Previously Ian was
Executive Chairman of Learndirect, where
he worked closely with Lloyds Development
Capital on Learndirect’s growth strategy and
before that was Chief Executive of Quadriga
Worldwide, Europe’s market leader in digital IP
communication and entertainment services for
hotels, where he was responsible for expanding
the business into 50 countries. Over the seven
year period of his stewardship, which included
the 2007 sale of the company by Terra Firma,
the business consistently over-achieved against
demanding financial targets. Earlier, Ian was
a member of the Industrial Advisory Board at
Permira Advisers LLP and worked on major
transactions including the €640m buy-out
of Hogg Robinson. Prior to this he was Chief
Executive of IKON Office Solutions, the document
management and office products provider for
six years, delivering significant growth both
organically and through several acquisitions.

6. Helen Buck
Executive Director – Estate Agency
Helen was appointed as Executive Director –
Estate Agency on 2nd February 2017 and has

overall responsibility for the performance, strategy
and development of LSL’s Estate Agency Division.
Prior to this role Helen had, since December
2011, served as an independent Non Executive
Director and was also a member of LSL’s
Nominations and Remuneration Committees.
Helen was previously Chief Operating Officer
at Palmer & Harvey. Prior to this she was part
of the Sainsbury’s management team from
2005 to 2015, including 5 years as a member
of the Operating Board. Helen has extensive
expertise in strategy, marketing, commercial and
operations. Before joining Sainsbury’s, Helen held
a number of senior positions at Marks & Spencer,
Woolworths and Safeway and was a senior
manager at McKinsey & Co.

7. Adam Castleton
Executive Director, Group
Chief Financial Officer
Adam was appointed as Group Chief Financial
Officer on 2nd November 2015. Adam has a

breadth of financial skills and experience in
the retail and services sectors. Adam joined
LSL from French Connection Group PLC
where he was the Group Finance Director. He
previously held leadership roles at a number
of market leading companies including O2
UK, eBay and The Walt Disney Company.
Adam has over 25 years’ experience in
finance, having started his career with Price
Waterhouse where he qualified as a chartered
accountant in 1989.

8. Sapna FitzGerald
General Counsel and Company Secretary
Sapna is a solicitor (qualified in 1998) and
has been in the role of General Counsel and
Company Secretary at LSL since 2004. Prior
to the management buy-out of Your Move and
e.surv, Sapna was a member of Aviva Life
Legal Services and had since 2001 formed
part of the team that supported Your Move and
e.surv Chartered Surveyors.

The Strategic Report (including the Strategy, the Business Model, the Business Reviews, the
Financial Review, the Principal Risks and Uncertainties, the Corporate Social Responsibility
Report and the Board) is approved by and signed on behalf of the Board of Directors.

Ian Crabb
Group Chief Executive Officer
7th March 2017

Adam Castleton
Group Chief Financial Officer
7th March 2017

LSL AR 2016_Sect1-3 B&C.indd 33

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Report of the Directors and
Corporate Governance Reports

In this section

Statement of Directors’ responsibilities in
relation to the Group Financial Statements

36 Report of the Directors
40 Corporate Governance Report
46 Audit Committee Report
54 Directors’ Remuneration Report

Your Move’s TV commercial, launched January 2016

LSL AR 2016_Sect1-3 B&C.indd 34

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Statement of Directors’
Responsibilities in Relation to
the Group Financial Statements

The Directors are responsible for preparing the Annual Report and the Group Financial Statements in accordance with applicable
United Kingdom law and those International Financial Reporting Standards (IFRS) as adopted by the EU.

Under Company Law the Directors must not approve the Group Financial Statements unless they are satisfied that they present fairly
the financial position of the Group and the financial performance and cash-flows of the Group for that period.

In preparing the Group Financial Statements, the Directors are required to:

• select suitable accounting policies in accordance with IAS 8 ‘Accounting Policies, Change in Accounting Estimates and Errors’

and then apply them consistently;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable

information;

• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to

understand the impact of particular transactions, other events and conditions on the Group’s financial position and financial
performance;

• state that the Group has complied with IFRSs, subject to any material departures disclosed and explained in the Financial

Statements; and

• make judgements and accounting estimates that are reasonable and prudent.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Group’s
transactions and disclose with reasonable accuracy at any time the financial position of the Group and enable them to ensure that
the Financial Statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for
safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other
irregularities.

The Directors are also responsible for preparing the Strategic Report, the Report of the Directors, the Directors‘ Remuneration
Report, the Audit Committee Report and the Corporate Governance Report in accordance with the Companies Act 2006 and
applicable regulations, including the requirements of the Listing Rules and the Disclosure and Transparency Rules.

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Report of the Directors

Business review and development
The Strategic Report (including the Chairman’s Statement and the Group Chief Executive’s Report) set out a review of the business
including details of LSL’s performance, developments (including future developments) and strategy.

Annual general meeting
The AGM will be held at the London offices of LSL, 1 Sun Street, London EC2A 2EP on 27th April 2017 starting at 4.00pm.

The Notice of Meeting convening the AGM is in a separate circular to be sent to Shareholders with this Report. The Notice of Meeting
also includes a commentary on the business of the AGM and notes to help Shareholders to attend, speak and/or vote at the AGM.

Financial results
The Strategic Report and Financial Statements set out the results of LSL.

Dividend
Due to the Boards positive view of the future prospects for the business, the proposed dividend is at the upper end of LSL’s previously
stated policy of applying a dividend payout ratio of between 30% to 40% of Group Underlying Operating Profit after interest and tax (as
per Note 12 to the Financial Statements). The Board has reviewed the policy in line with the risks and capital management decisions
facing the Group.

A final dividend of 6.3 pence per Share (2015: 8.6 pence per Share) will be proposed to Shareholders at the 2017 AGM, giving a total
dividend for 2016 of 10.3 pence per Share (2015: 12.6 pence per Share).

The ex-dividend date for the final dividend is 30th March 2017 with a record date of 31st March 2017 and a payment date of 2nd May
2017. Shareholders have the opportunity to elect to reinvest their cash dividend and purchase existing Shares in LSL through a dividend
reinvestment plan.

Employees
LSL recognises that its people are a valuable asset and it is committed to providing a working environment in which employees
can develop to achieve their full potential with opportunities for both professional and personal development. By creating such an
environment, LSL believes that this will enable the retention and recruitment of the right people to work at every level throughout the
Group. An essential part of this strategy is to encourage and promote effective communication with all employees, which also ensures
that LSL, in its decision making, takes into account its employees views.

The Group has an equal opportunities policy so that all job applicants are treated fairly and without favour or prejudice throughout
selection, recruitment, training, development and promotion. Further details of how LSL engages with its employees are contained in the
CSR statement, included in this Report. The CSR statement also summarises the Group’s policy in relation to disabled employees.

Financial instruments
The Strategic Report sets out LSL’s strategies and objectives relating to treasury and risk management. Details of the financial
instruments are set out in Note 30 to the Financial Statements.

The Greenhouse Gas Emissions (Directors’ Reports) Regulations 2013 and Part 7 of The Companies Act 2006 (Strategic Report and
Directors’ Reports) Regulations 2013.

In accordance with Part 7 of The Companies Act 2006 (Strategic Report and Directors’ Reports) Regulations 2013, each year LSL
reports on targets and KPIs approved by the Board within the Report of the Directors. The 2016 results are included within the CSR
statement of this Report.

Directors
The current Directors’ are listed with their biographies in the Board at pages 32 to 33 of this Report. During the year Adrian Gill was also
a Director and he stepped down from the Board on 4th January 2017. Further, Helen Buck became Executive Director – Estate Agency
on 2nd February 2017, and ceased to be a Non Executive Director and member of the Remuneration Committee and Nominations
Committee at the same time.

Full details of the Directors service contracts, letters or appointment and interests in LSL Shares are also detailed within the Directors’
Remuneration Report.

Re-election and election
All of the current Directors will each retire at the AGM and, being eligible intend to stand for re-election. LSL’s articles provide that the
Board may appoint an individual to act as a Director, but anyone so appointed will retire from office at the next AGM and seek election.
Accordingly, all of the Directors who were elected at the 2016 AGM will also stand for re-election at the 2017 AGM and any Directors
appointed since the 2016 AGM will stand for election.

Shareholders may by ordinary resolution elect or re-elect any individual as a Director. In addition, by an amendment to the Nominations
Committee’s Terms of Reference, LSL has confirmed its commitment to annual elections of its Directors.

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The biographical details for all LSL Directors are set out on pages 32 and 33 of this Report.

During the 2016 Board effectiveness review, the performance of the Directors, who are all standing for re-election, was specifically evaluated
and the Board confirmed that it values the experience and commitment to the business demonstrated by each of these individuals.

Directors’ interests
The interests of the current Directors in LSL are contained within the Directors’ Remuneration Report included in this Report. During the
period between 31st December 2016 and the date of this Report, there were no changes in the Directors’ interests other than the purchases
of Shares by Ian Crabb (211 Shares) and Adam Castleton (211 Shares) as participants of LSL’s SIP/BAYE scheme. These Shares were
purchased by the Trust at the prevailing market rate.

The Board has during the year observed and maintained arrangements for the management and recording of conflicts in line with its policy.
This includes the observance of an anti-bribery and hospitality policy to ensure compliance with section 176 of the Companies Act 2006.

Further, during the year, no Director was materially interested in any contract that is or was significant to the business of the Group or any
subsidiary undertaking.

Directors’ service contracts
Details of the Executive Directors’ service agreements and the current Non Executive Directors’ letters of appointment are set out in the
Director’s Remuneration Report and are available for inspection at the Registered Office during normal business hours and at each AGM.

Auditor
Ernst & Young LLP, the external auditor of the Group has advised of its willingness to continue in office and a resolution to re-appoint them
to this role and the authority for their remuneration to be determined by the Directors will be proposed at the AGM. See also the Audit
Committee Report for further details including details of the retendering exercise completed during 2016.

Details of LSL’s policy designed to safeguard the independence and objectivity of the external auditors is included in the Audit Committee
Report.

Share capital
LSL 0.2 pence Ordinary Shares are listed on the London Stock Exchange and are the only class of shares in issue.

Rights and obligations attached to Shares
Each issued Share has the same rights attached to it as every other issued Share: the rights of each Shareholder include the right to vote at
general meetings, to appoint a proxy or proxies, to receive dividends and to receive circulars from LSL.

Details of Share capital are set out in Note 25 to the Financial Statements. There have been no changes to the Share capital during 2016. LSL
will seek Shareholder approval for the renewal of authority for the Directors to allot unissued Ordinary Shares and for the power to dis-apply
statutory pre-emption rights at the 2017 AGM. LSL did not obtain Shareholder approval to dis-apply pre-emption rights at the 2016 AGM.

Full details of the deadline for exercising voting rights in respect of the resolutions to be considered at the 2017 AGM are set out in the Notice
of Meeting.

Employee share schemes
LSL has two Employee Benefit Trusts. The first was established in 2006 prior to LSL’s flotation on the London Stock Exchange and LSL
appointed Capita Trustees Limited (Trustees) to operate the LSL Property Services plc Employee Share Scheme (Trust). The Trustees of
this Trust operate both the LSL Property Services plc Employee Share Incentive Plan (Buy As You Earn or BAYE) and the Save As You Earn
(SAYE) Plans. The Trust is able to acquire and to hold Shares to satisfy options or awards granted under any discretionary share option
scheme or long-term incentive arrangement operated by LSL. Details of the Shares acquired by the Trust are set out in Note 13 to the
Financial Statements. The Trustees have waived the right to any dividend payment in respect of each Share held by them in 2016 and to all
future payments.

The second Employee Benefit Trust was established in November 2011 (the 2011 EBT), as part of the acquisition of Marsh & Parsons.

While the beneficiaries of the 2011 EBT are the LSL employees, the 2011 EBT acquired the Growth Shares as part of the transaction and
some of these shares were acquired by members of the current Management Team of Marsh & Parsons in 2012, 2013 and 2015. This was in
accordance with the previously stated objective that current and future managers at Marsh & Parsons apply for Growth Shares, as part of a
package of measures designed to incentivise the management of Marsh & Parsons. The 2011 EBT does not currently hold any LSL Shares.

Viability statement
In accordance with provision C.2.2 of the Code, the Directors confirm that they have a reasonable expectation that the Group will continue
to operate and meet its liabilities, as they fall due, for the next three years. This assessment was considered against the Group’s expected
financial position, existing banking facilities and potential management actions.

A period of three years, ending on 31st December 2019, has been chosen for the purpose of the this viability statement, as this is consistent
with the Group’s budget and strategic planning cycle and is supported by the Group’s funding arrangements, which expire in May 2020.
The Directors’ assessment has been made with reference to the Group’s current position and prospects, the current three year strategy
and the Group’s principal risks and uncertainties and how these are managed as detailed on pages 22 to 25 of the Strategic Report. The

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Report of the Directors

process by which LSL developed its viability statement is set out on page 22 of the Principal Risks and Uncertainties section of this Report.

The strategic plan has been stress tested using sensitivity analysis which reflects plausible but severe combinations of the principal risks of
the business, primarily through reducing revenues and cash-flow as a result of a severe downturn in the UK property market.

Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out
in the Business Review sections of the Strategic Report. The financial position of the Group, its cash-flows, liquidity position and the
Group’s policy for treasury and risk management are described in the Financial Review sections of the Strategic Report. Details of the
Group’s borrowing facilities are set out in Note 22 to the Financial Statements. Note 30 to the Financial Statements describes the Group’s
objectives, policies and processes for managing its capital; its financial risk management objectives; details of its financial instruments
and hedging activities; and its exposures to credit risk and liquidity risk. A description of the Group’s principal risks and uncertainties and
arrangements to manage these risks are detailed within the Strategic Report on pages 22 to 25.

As explained in Note 30 to the Financial Statements, the Group meets its day to day working capital requirements through a revolving
credit facility, which was renewed in May 2016 and the Group currently has a £100.0m facility which is committed for a period up to May
2020. As stated in Note 31 to the Financial Statements as at 31st December 2016 the Group had available £79.7m of undrawn committed
borrowing facilities in respect of which all conditions precedent had been met. The Group’s forecasts and projections, taking account of
reasonably possible changes in trading performance, show that the Group should be able to operate within the terms of its current facility.

The Directors have considered the future profitability of the Group, forecast of future cash-flows, banking covenants, liquidity of
investments and joint ventures and the ability of the Group to re-finance any loans due to mature in the next 12 months (in addition to the
Group’s facility which is due to mature in May 2020) where necessary. Further the Directors considered the key judgments, assumptions
and estimates underpinning the review.

After making enquiries, the Directors consider that the Group has adequate resources to continue in operational existence for the
foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing this Report.

Disclosure of information to the auditor
Having made enquiries of fellow Directors and of the external auditor, each of the current Directors, confirms that:

• to the best of his/her knowledge and belief, there is no information (as defined in the Companies Act 2006) relevant to the preparation of

this Report of which the external auditors are unaware; and

• he/she has taken all the steps a Director might reasonably be expected to have taken to be aware of relevant audit information and to

establish that the external auditors are aware of that information.

Directors’ qualifying third party indemnity provisions
LSL had qualifying third party indemnity provisions for the benefit of the Directors in force from the start of the financial period to the date of
this Report, subject to the conditions set out in the Companies Act 2006. LSL has put in place ‘Directors & Officers Liability’ insurance and
indemnities to cover for this liability.

Additional information for Shareholders
The following provides the additional information required for Shareholders as a result of the implementation of the Takeovers Directive into UK Law.

Share capital
At 31st December 2016, LSL’s issued Share capital comprised 104,158,950 0.2 pence Ordinary Shares. The authorised Share capital is
500,000,000 Ordinary Shares of 0.2 pence each.

Ordinary Shares
On a show of hands at a general meeting of LSL every holder of Ordinary Shares present in person and entitled to vote shall have one
vote and on a poll, every member present in person or by proxy and entitled to vote shall have one vote for every Ordinary Share held. The
notice of the AGM which accompanies this Report specifies deadlines for appointing a proxy in relation to resolutions to be passed at a
general meeting. Where the Chairman of the AGM is appointed as proxy, such proxy votes are counted and the numbers for, against or
withheld in relation to each resolution are announced at the AGM and published on LSL’s website after the meeting (www.lslps.co.uk).

There are no restrictions on the transfer of Ordinary Shares in LSL other than:

• certain restrictions which may from time to time apply under applicable laws and regulations (for example, insider trading laws and

market requirements relating to close periods); and

• pursuant to the Listing Rules of the FCA whereby certain employees of LSL require the approval of LSL to deal in LSL’s securities.

LSL’s Articles of Association may only be amended by way of a special resolution at a general meeting of the Shareholders. LSL has the
authority under section 701 of the Companies Act 2006 to make market purchases of the Ordinary Shares of the Group on such terms
and in such manner that the Directors determine. The maximum Shares to buy back is capped at 10% of the Ordinary Share capital of the
Group being 10,415,895 Ordinary Shares.

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Company Share schemes
As at 31st December 2016, the Trust held 1.46% (2015: 1.6%) of the issued Share capital of LSL in trust for the benefi t of employees of the
Group and their dependents. The voting rights in relation to these Shares are exercised by the Trustees.

Signifi cant agreements – change of control
Subsidiaries of LSL are party to agreements which take eff ect, alter or terminate upon a change of control of the subsidiary company
following a takeover bid. The majority of the income derived through the provision of Surveying and Valuation Services and the Asset
Management income streams are driven by specifi c contracts. Any termination of such contracts on the change of control of the relevant
subsidiary company will have a signifi cant impact on the revenue of those income streams.

The Group is party to a number of banking agreements which upon a change of control of the Group are terminable by the bank and all
outstanding amounts become immediately due and payable.

Compensation for loss of offi ce – change of control
There are no agreements between LSL and its Directors or employees providing for compensation for loss of offi ce or employment (whether
through resignation, purported redundancy or otherwise) that occurs because of a takeover bid.

Post balance sheet events
There have been no post balance sheet events to report.

Directors’ responsibility statement
Each of the current Directors confi rms that to the best of their knowledge:

• the Financial Statements, prepared in accordance with IFRS as adopted by the EU, give a true and fair review of the assets, liabilities,

fi nancial position and results of LSL and its subsidiaries included in the consolidation taken as a whole;

• the Strategic Report (including the Strategy, the Business Model, the Business Reviews, the Financial Review, the Principal Risks and
Uncertainties, Corporate Social Responsibility Report and the Board) and the Directors’ Report (including the Corporate Governance
Reports) include a fair review of the development and performance of the business and the position of LSL and its subsidiaries included in
the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face; and

• the Report (including the Financial Statements), taken as a whole, is fair, balanced and understandable and provides the information

necessary for Shareholders to assess LSL’s performance, business model and strategy.

Substantial shareholdings
As at 31st December 2016 and as at 6th March 2017, the Shareholders set out below have notifi ed LSL of their interest under DTR 5:

Institution
Harris L.P
Brandes Investment Partnership L.P
Setanta Asset Management Ltd
Kinney Asset Management, LLC
First Pacifi c Advisers, LLC
The Capital Group of Companies, Inc
Henderson

Individual (excluding Directors)
David Newnes

Nature of
holding

Benefi cial
Benefi cial
Benefi cial
Benefi cial
Benefi cial
Benefi cial
Benefi cial

31st December 2016

6th March 2017

Number of
0.2 pence
Ordinary
Shares

11,585,233
10,412,023
10,456,726
7,694,643
6,176,093
6,160,282
4,182,818

% of
issued
shares

11.12
10.00
10.04
7.38
5.93
5.95
4.01

Number of
0.2 pence
Ordinary
Shares

11,585,233
12,503,382
10,407,843
7,694,643
5,267,163
4,658,270
4,182,818

% of
issued
shares

11.12
12.00
9.99
7.39
5.06
4.47
4.01

Registered Holder

3,479,910

3.34

3,479,910

3.34

The Report of the Directors has been approved by and is signed on behalf of the Board of Directors

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Sapna B FitzGerald
Company Secretary
7th March 2017

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Corporate Governance Report

UK Corporate Governance Code (September 2014) (the Code)
The Board is committed to the highest standards of corporate governance and the Directors recognise the value and importance of
meeting the principles of good corporate governance as set out in the Code. This part of the Report describes how LSL has complied
with the Code during 2016 and the corporate governance arrangements that are in place for 2017.

During 2016, LSL complied with the provisions of the Code in all respects.

Whilst this Report assesses compliance against the 2014 edition of the Code, during 2016 the Board reviewed and updated its
governance arrangements in relation to the Audit Committee to reflect changes introduced by the April 2016 edition of the Code.

In relation to 2017, the April 2016 edition of the Code applies to LSL with effect from 1st January 2017. Further, the Board will also
consider the findings of the Business, Innovation and Skills Parliamentary Select Committee’s review of corporate governance and the
Government’s proposals for reform, which were set out in the Green Paper published in November 2016.

LSL also notes the announcement by the FRC of 16th February 2017 of the fundamental review of the Code which it intends to conduct in 2017.

The Board
At the date of this Report, the Board has seven members, whose details are set out below.

Director Name

Helen Buck (1)

Kumsal Bayzit Besson

Position(s)

Executive Director – Estate Agency

Independent Non Executive Director – member of Nominations Committee, Remuneration Committee
and Audit Committee

Ian Crabb

Executive Director – Group Chief Executive Officer

Adam Castleton

Executive Director – Group Chief Financial Officer

Simon Embley

Bill Shannon

David Stewart (2)

Non Executive Director – Chairman

Independent Non Executive Director – Deputy Chairman, Senior Independent Director, Chairman
of the Remuneration Committee, Chairman of the Nominations Committee and a member of Audit
Committee

Independent Non Executive Director – member of Nominations Committee and Remuneration
Committee and Chairman of the Audit Committee

Notes:
1 During 2016 Helen Buck was a Non Executive Director and member of the Nominations Committee and Remuneration Committee. Helen

was appointed as Executive Director – Estate Agency on 2nd February 2017.

2 David Stewart was appointed as Chairman of the Audit Committee with effect from the 2016 AGM.

During 2016, the Nominations Committee and the Board considered at length a number of aspects regarding its composition. In addition
the Nominations Committee undertook a search for the recruitment of the Executive Director – Estate Agency, to replace Adrian Gill who
stepped down from the Board on 4th January 2017. Following a comprehensive recruitment process, which included the engagement
of executive search agencies and interviews with external and internal candidates, the Nominations Committee recommended the
appointment of Helen Buck as Executive Director – Estate Agency and the appointment was approved by the Board and took effect on
2nd February 2017. The Nominations Committee was assisted in its search by executive search agencies, The MBS group (trading name of
Moira Benigson Executive Search LLP) and The Zygos Partnership (trading name of Zygos LLP) and neither agency has any connection
with LSL.

Further details on all Board changes are set out in this Corporate Governance Report and all of the current Directors are listed with their
biographies in The Board at pages 32 and 33 of this Report.

There is a clear division of responsibilities between the Chairman and the Group Chief Executive Officer. The Chairman’s key
responsibilities are leadership of the Board and ensuring its effectiveness on all aspects of its role. The Chairman sets the Board’s agenda,
ensuring that adequate time is available for discussion of all agenda items, and in particular strategic issues. He also promotes a culture
of openness and debate by facilitating the effective contribution of the Non Executive Directors in particular, and ensuring constructive
relations between the Executive and Non Executive Directors.

The Group Chief Executive Officer’s key responsibility is the running of the business and his delegated powers have been set by the
Board. The Directors are satisfied that the balance of Executive and Non Executive Directors is appropriate and that no individual or
group may dominate the Board’s decisions.

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During 2016 the Non Executive Directors (excluding the Chairman) were determined to be independent in accordance with B.1.1 of the
Code, save that Helen Buck was not deemed to be independent during the final quarter of 2016 because she provided consultancy
services to the Estate Agency Division during this period. However, the Board composition continued to comply with B.1.2 of the
Code, namely that at least half of the Board (excluding the Chairman) comprised Independent Non Executive Directors. The current
Non Executive Directors together have a range of experience which is described in more detail overleaf in the Nominations Committee
section.

In addition to his role as Chairman, Simon Embley’s other board appointments comprise a small estate management company, Road to
Health (a healthcare provider) and he is also Non Executive Chairman of Global Property Ventures Limited (a tenant deposit protection
scheme).

During the year the Directors continuously review, and are encouraged to provide feedback on, the effectiveness of the Board. Further,
they undertake an annual evaluation of the performance of the Board which includes an evaluation of the Board, its Committees and
of individual Directors (including relevant skills, experience and diversity) to ensure that the Directors remain individually and collectively
effective.

The evaluation process relating to 2016 involved discussions between each Director and the Chairman, meetings of the Board and
discussions between the Non Executive Directors. As in previous years the Non Executive Directors have also evaluated the Chairman’s
performance, after taking into account the views of the Executive Directors.

No significant issues requiring action arose from the 2016 evaluations and the outcomes of the exercise were reported to the Board.
The appraisal confirmed that the Board and its Committees were discharging their responsibilities effectively and produced a number of
recommendations to further improve the effectiveness of the Board. As a result, during 2017 the Board will:

a. Review its meeting arrangements, including agenda planning, the provision of information to Board members and the frequency of
meetings for the Non Executive Directors. Combined these recommendations seek to ensure that the Board is able to focus on the
development and execution of LSL’s strategy, as well as monitoring performance and governance matters.

b. Develop its succession planning arrangements for Executive Directors and members of the senior Management Teams.

c. Deliver additional Director training.

d. Evaluate the Group’s cultures, values and ethics and continue to focus on the delivery of fair customer outcomes.

During 2016, the Board continued to monitor the FRC’s review of succession planning and discussed other relevant publications to aid it
in its consideration of key issues and good practice.

LSL continues to recognise the benefits of diversity (including relevant professional skills, experience, gender and race) and the current
Board composition includes two female Directors, Helen Buck (Executive Director – Estate Agency) and Kumsal Bayazit Besson
(Independent Non Executive Director). Whilst the Directors remain of the view that the setting of targets for the number of female
directors on the Board is not necessary and that it will continue to appoint on merit, both the Chairman of the Board and the Chairman
of the Nominations Committee ensure that all searches (including those undertaken in 2016) continue to take into account diversity,
including professional skills, experience, gender and race.

Copies of the Executive Directors’ service agreements and of the Non Executive Directors’ letters of appointment are available for
inspection at the Registered Office during normal business hours and at each AGM. Further details of Director service contracts and
letters of appointment are contained in the Directors’ Remuneration Report.

All Directors may receive independent professional advice at LSL’s expense, if necessary, for the performance of their duties. This is in
addition to the access every Director has to the Company Secretary and her team. The Company Secretary is responsible for advising
the Board on all matters of corporate governance, ensuring that all Board procedures are followed and facilitating Director induction and
training.

During 2016 and in response to the 2015 Board evaluation exercise, the Board reviewed and approved revised induction arrangements.
Each newly appointed Director receives an induction on a range of topics, including as appropriate, the responsibilities of a listed public
company director and on LSL’s business. Thereafter, LSL provides the necessary resources for developing this understanding and
knowledge. Further, the Chairman regularly reviews and agrees any training and development needs with each of the Directors and any
training needs are also discussed as part of the annual evaluation exercise.

During 2016 the Board held 10 scheduled meetings (including a three year planning meeting and a strategy meeting). Each of the
Directors was able to allocate sufficient time to LSL to discharge their responsibilities effectively and the attendance of each of the
Directors at the Board meetings (as a Director or a Committee member) is set out in this Report. During 2017 the Board is scheduled to
meet nine times (including a three year planning meeting and a strategy meeting). Additional meetings will be held as required.

During 2016 the Non Executive Directors collectively scheduled to meet twice without the Executive Directors being present and it is the
intention that the number of Non Executive Director meetings will be increased during 2017. In addition, the Non Executive Directors are
scheduled to meet at least once in the year without the Chairman being present.

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Corporate Governance Report

Board and Committee attendance 2016

Director
Kumsal Bayazit Besson
Helen Buck
Adam Castleton
Ian Crabb
Simon Embley
Adrian Gill
Mark Morris
Bill Shannon
David Stewart

Board (including
3 year planning and
a strategy meeting)

Audit
Committee

Remuneration
Committee

Nominations
Committee

Notes

10
9
9
10
10
10
3
10
10

3
-
-
-
-
-
1
3
3

4
3
-
-
-
-
1
4
4

2
1
-
-
-
-
1
2
2

1
2

3
4

Notes:
1 Helen Buck was not present at one of the scheduled Board meetings and one Remuneration Committee meeting during 2016. She received the papers in advance of the meetings and

provided her comments and queries to the Chairman of the meeting and the Group Chief Executive Officer for raising at the meetings. Helen Buck was appointed as Executive Director –
Estate Agency on 2nd February 2017 and she did not participate in any Board, Nominations Committee or Remuneration Committee discussions in relation to her appointment.

2 Adam Castleton was not present at one of the scheduled Board meetings during 2016. He received the papers in advance of the meeting and provided his comments and queries to the

Chairman and the Group Chief Executive Officer for raising at the meeting.

3 Adrian Gill stepped down from the Board on the 4th January 2017.

4 Mark Morris retired from the Board at the 2016 AGM, therefore his attendance is only recorded for meetings taking place prior to the 2016 AGM.

LSL’s Articles of Association stipulate that all of the Directors appointed since the previous AGM and one third of the remaining Directors,
including any Director who has not been elected or re-elected at either of the two preceding AGMs, are required to retire and seek election/
re-election (as appropriate). Notwithstanding this, since 2012 LSL has, in accordance with best practice, and by an amendment to the
Nominations Committee Terms of Reference, chosen to adopt annual elections for all Directors and in accordance with this policy, all of the
Directors will stand for re-election at the forthcoming AGM.

The Board is primarily responsible for the overall management of the Group and for decisions on Group strategy, including approval
of the Group’s strategy, its annual business plans and budgets, the interim and full year financial statements and reports, any dividend
proposals, the accounting policies, any major capital projects, any investments and disposals, its succession plans and the monitoring of
financial performance against budget and forecast and the formulation of the Group’s risk appetite framework, including the identification,
assessment and monitoring of LSL’s principal risks and uncertainties. In accordance with best practice, LSL has adopted a policy of Matters
Reserved for the Board which is annually reviewed by the Board.

There is a programme of regular reviews of performance and developing best practice in matters such as employment, health and safety,
environmental and social and community interests (including human rights and ethical issues). LSL believes that CSR is necessary to
support responsible business decisions that consider the broad impact of corporate actions on people, communities, and the environment.
Accordingly, the Board takes account of the significance of environmental, social and governance matters (ESG) when making decisions.
Further details of LSL’s CSR objectives including the steps being taken to ensure compliance with the requirements of the Modern Slavery
Act 2015 can be found in the CSR Statement included in this Report.

The Board has adopted principles of good boardroom practice which set out procedures on how Directors are given accurate, timely
and clear information and how they can seek and obtain information or advice necessary for them to discharge their duties and these
arrangements are reviewed annually as part of the Board’s evaluation process referred to above.

Under the Companies Act 2006, a director must avoid a situation where he/she has, or can have, a direct or indirect interest that conflicts, or
possibly may conflict, with the company’s interest. The Companies Act 2006 allows directors of public companies to authorise conflicts and
potential conflicts where appropriate and where the articles of association contain a provision to this effect, as LSL’s Articles do. Accordingly,
the Board has adopted procedures for the Directors to report any potential or actual conflict to the Board for their authorisation where
appropriate. Each Director is aware of the requirement to seek approval of the Board for any new conflict situations, as they may arise. The
process of reviewing conflicts disclosed, and authorisations given, is repeated both annually and following the appointment of any new
Director. Any conflicts, or potential conflicts, considered by the Board and any authorisations given are recorded in the Board minutes and in
a register of Director’s conflicts which is maintained by the Company Secretary.

Board Committees
The Board has delegated specific responsibilities to three standing Committees of the Board: Nominations, Remuneration and Audit. The
membership of these Committees and a summary of their main duties under their Terms of Reference are set out below. The full Terms of
Reference may be viewed on LSL’s website (www.lslps.co.uk). During 2016, the Board reviewed the Terms of Reference for each of the
Committees and during 2017 will continue to review each terms of reference in response to amendments to FRC guidance and the Code.

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It is also the intention that Bill Shannon as Chairman of the Nominations Committee and Remuneration Committee and David Stewart as
Chairman of the Audit Committee will both attend the 2017 AGM to answer any questions.

Nominations Committee
Bill Shannon is the Chairman of the Nominations Committee and, as at the date of this Report the other members of the Nominations
Committee are Kumsal Bayazit Besson and David Stewart. During 2016, Helen Buck and Mark Morris were also members of the
Nominations Committee. Mark Morris retired at the 2016 AGM and Helen Buck stepped down from the Nominations Committee on
2nd February 2017 when she was appointed as Executive Director – Estate Agency. Helen Buck did not participate in any Nominations
Committee discussions regarding her appointment into the role. The Nominations Committee was assisted in its search by executive
search agencies, The MBS Group (trading name of Moira Benigson Executive Search LLP) and The Zygos Partnership (trading name of
Zygos LLP) and neither agency has any connection with LSL.

The Nominations Committee met twice in 2016 and the Group Chief Executive Officer, the Chairman, the Group HR Director and the
Company Secretary were invited to attend these meetings and assisted the Nominations Committee in its deliberations during this period.

Roles and responsibilities of the Nominations Committee
The duties of the Nominations Committee are governed by its Terms of Reference, which was reviewed in 2016 to ensure continued
compliance with the Code and its role includes:

a. to regularly review the structure, size and composition (including skills, knowledge and experience) required of the Board and make

recommendations to the Board with regard to any changes;

b. recommend appointments after the evaluation of the balance of skills, experience, independence and knowledge on the Board, the
diversity, including gender and race, and, in light of this evaluation, the Nominations Committee will also prepare a description of the
role and capabilities required for each particular appointment;

c. to give full consideration to succession planning in the course of its work, taking into account the challenges and opportunities facing
LSL, and what skills and expertise are therefore needed on the Board in the future. The Nominations Committee will also satisfy
itself that plans are in place for orderly succession for appointments to the Board and to senior management, so as to maintain an
appropriate balance of skills and experience within the Group and on the Board to ensure progressive refreshing of the Board;

d. to recommend to the Board as a whole the selection and appointment of new executive and non executive directors in accordance
with the Code, ensuring that any search is conducted, and appointments are made, on merit, against objective criteria, with due
regard for the benefits of diversity, including gender and race;

e. report on the nomination of all new Board appointments and undertake an annual performance evaluation to ensure that all members

of the Board have devoted sufficient time to LSL to discharge their duties effectively;

f. to keep under review the leadership needs of the Group at varying levels with a view to ensuring the continued ability to compete

effectively in LSL’s marketplaces;

g. to ensure that prior to the appointment of the chairman, a job description is prepared which includes an assessment of the time

commitment expected for the role, recognising the need for availability in the event of a crisis; and

h. as part of the process for nominating candidates for any appointments, obtained details of and review any interests that the candidate

may have which conflict or may conflict with the interest of LSL.

What the Nominations Committee did in 2016
During the year, as part of it discussions, the Nominations Committee evaluated the following matters:

a. Board composition, including gender, race and professional diversity.

b. Non Executive Director skills, expertise and experience together with succession planning arrangements taking into consideration the

term of each Non Executive Director.

c. Executive Committee performance together with Executive Committee and senior management succession planning arrangements.

d. The Nominations Committee’s performance and its terms of reference were reviewed to ensure continued compliance with the Code

and FRC guidance.

e. Conducted a search for the recruitment into the role of Executive Director – Estate Agency. Here the Nominations Committee

considered and, where appropriate made recommendations to the Board in relation to LSL’s search. The search, which began in
2016, was concluded in February 2017, when the Board appointed Helen Buck as Executive Director – Estate Agency. LSL was
assisted by an executive search agency in the recruitment for the role of Executive Director – Estate Agency. Helen Buck did not
participate in any discussions relating to her appointment as Executive Director – Estate Agency.

As part of its discussions in 2016 the Nominations Committee also considered FRC guidance and other publications relevant to the roles
and responsibilities of the Nominations Committee.

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Corporate Governance Report

Board composition and diversity
The Board has expertise in strategy, technology, estate agency, surveying, financial services, the residential housing sector, commercial
property, retail and marketing, operations, business services, entrepreneurial private and public companies, finance, consumer and
employee matters, and corporate governance.

LSL is committed to promoting diversity throughout the Group and is preparing for the introduction of gender pay reporting which is due
to commence in 2018. Whilst LSL has not adopted a formal policy on diversity, including professional skills, experience, race and gender
diversity, the Chairman of the Nominations Committee ensures that diversity is taken into consideration in the recruitment of new Directors.

For details of gender reporting in relation to the Board, within the senior Management Teams and Group employees, see the CSR statement.

Remuneration Committee
The Remuneration Committee is chaired by Bill Shannon and at the date of this Report its other members are Kumsal Bayazit Besson and
David Stewart. During 2016, Helen Buck and Mark Morris were also members of the Remuneration Committee. Helen Buck stepped down
from the Remunerations Committee on 2nd February 2017 and Mark Morris retired at the 2016 AGM. Helen Buck did not participate in any
discussions relating to her remuneration as Executive Director – Estate Agency.

The Remuneration Committee met four times during the year and the Group Chief Executive Officer, the Chairman, the Group HR Director
and the Company Secretary were invited to attend some of these meetings and assist the Remuneration Committee in its deliberations
during this period.

Role and responsibilities of the Remuneration Committee
The Remuneration Committee is responsible for determining LSL’s policy on the remuneration of Executive Directors and selected senior
managers, including pension rights and any compensation payments. It is also responsible for making recommendations for grants of
shares under the employee share schemes. The Directors’ Remuneration Report provides details of how the Remuneration Committee has
discharged these duties which can be found from page 54 of this Report.

The duties of the Remuneration Committee are governed by its Terms of Reference, which were reviewed in 2016 to ensure continued
compliance with the Code. The Terms of Reference of the Remuneration Committee are available from the Company Secretary or LSL’s
website (www.lslps.co.uk).

The Remuneration Committee’s overall purpose is to ensure that the levels of remuneration are sufficient to attract, retain and motivate directors
of the quality required to run LSL successfully and to ensure that LSL avoids paying more than is necessary for this purpose. The Remuneration
Committee also ensures that a significant proportion of the Executive Director’s remuneration is structured so as to link rewards to corporate
and individual performance. In discharging its responsibilities, especially when determining annual salary increases, the Remuneration
Committee is sensitive to pay and employment conditions elsewhere in the Group. In relation to Executive Director remuneration for 2017, the
Remuneration Committee has recommended performance-related elements which are transparent, stretching and rigorously applied.

What the Remuneration Committee did in 2016
During 2016, the Remuneration Committee considered the following matters:

a. Ensured that the levels of remuneration were sufficient to attract, retain and motivate Executive Directors of the quality required to run

LSL successfully.

b. Completed a review of LSL’s remuneration policy which included significant Shareholder consultations.

c. Reviewing and making recommendations to the Board on any remuneration arrangements or other payments payable to Executive

Directors (including previous directors) and senior management.

d. Review of the Executive Directors shareholding guidelines and Executive Director shareholdings.

e. Review of the Remuneration Committee’s performance and its terms of reference to ensure continued compliance with the Code and

FRC guidance.

As part of its discussions in 2016 the Remuneration Committee considered FRC guidance and other publications relevant to the roles and
responsibilities of the Remuneration Committee.

Details of any remuneration consultants engaged by the Remuneration Committee during the year are set out in the Directors’ Remuneration
Report.

None of the current Remuneration Committee members have and nor did the 2016 Remuneration Committee members have any personal
financial interest (other than as Shareholders), any conflicts of interest arising from cross directorship, or any day to day involvement in
running the business. The Remuneration Committee recognises and manages conflicts of interest when receiving views from the Executive
Directors or senior managers about any proposals. The Remuneration Committee makes recommendations to the Board and no Director is
permitted to participate in any discussion about their remuneration.

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The Remuneration Committee may, in exercising its discretion in relation to the remuneration of Executive Directors and selected senior
managers, take into account LSL’s performance on governance (including regulatory compliance) and CSR related issues and it ensures
that the incentive schemes put in place do not raise any ESG issues by inadvertently motivating irresponsible behaviour.

Audit Committee
The Audit Committee is chaired by David Stewart and at the date of this Report, its other members are Bill Shannon and Kumsal Bayzit
Besson. During 2016, Mark Morris was also a member of the Audit Committee. At the 2016 AGM Mark Morris retired from the Board and
its Committees, including as Chairman of the Audit Committee. David Stewart was appointed as Chairman of the Audit Committee at the
2016 AGM, and the Board and Nominations Committee has determined that David Stewart has recent and relevant financial experience as
is required by the Code. During the 2016 Board and Committee evaluation process the Board also confirmed that the Audit Committee as
a whole has the competence relevant to the sectors in which LSL operates and that it includes at least one member who has recent and
relevant financial experience.

The Committee met on three occasions in 2016. LSL’s Head of Risk and Internal Audit, the external auditors, the Chairman, the Executive
Directors (including the Group Chief Executive Officer and the Group Chief Financial Officer), the Group Financial Controller and the
Company Secretary were invited to attend parts of these meetings to assist the Audit Committee in its deliberations during this period. The
Audit Committee met with the auditors without the Executive Directors being present twice during 2016.

Further details of the duty and responsibilities of the Audit Committee are shown on pages 46 and 47 of this Report.

Shareholder relations
LSL places a great deal of importance on communication with its stakeholders and is committed to establishing constructive relationships
with investors and potential investors in order to assist it in developing an understanding of the views of its Shareholders.

LSL maintains a dialogue with institutional Shareholders through regular meetings with such Shareholders to discuss strategy, performance
and governance matters and to obtain investor feedback. The views of the Shareholders expressed during these meetings are reported to
the Board. In addition presentations will be arranged from time to time for Shareholders and analysts, including after the interim and full year
results.

Steps are taken to ensure that all members of the Board understand the views of major Shareholders. This is achieved in a number of ways
including feedback from the corporate advisors, Executive Directors and the distribution of analysts’ reports to the Board.

In addition each year all of the Non Executive Directors, including Simon Embley (Chairman) and Bill Shannon (Deputy Chairman and
Senior Independent Director), are offered the opportunity to attend meetings with all Shareholders as they require. If any Shareholder or any
Shareholder representative groups would like to discuss any issues or concerns with the Non Executive Directors, they can be contacted
through the Company Secretary’s office (see Shareholder Information at page 159 of this Report for details).

With regard to individual Shareholders, the Board considers that the main forum for communication is at the AGM and all of the current
Directors will be available at the 2017 AGM to meet with Shareholders.

During 2016 LSL consulted with significant Shareholders in response to the proxy voting at the 2016 AGM and on Remuneration Policy
changes which are being presented for Shareholder approval at the 2017 AGM. During 2017, LSL will engage with significant Shareholders
and their representative bodies, as appropriate, in respect of any proposed changes to the Remuneration Policy and on the implementation
of the Remuneration Policy.

All of LSL’s announcements are published on the LSL website (www.lslps.co.uk), together with copies of presentation material and financial
reports.

Sharedealing Code
Following the implementation of the Market Abuse Regulation, LSL has put in place a new Sharedealing Policy and Code to ensure
regulatory compliance. This new Sharedealing Policy and Code applies to the Directors, PDMRs and other relevant employees of LSL.

Takeover Directive
The Group has addressed the matters required to be addressed by the Takeover Directive which was implemented in the UK in accordance
with statutory provisions in Part 28 of the Companies Act 2006 in the Report of the Directors. Please refer to the Report of the Directors for
further details.

The Corporate Governance Report is approved by and signed on behalf of the Board of Directors

Sapna B FitzGerald
Company Secretary
7th March 2017

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Audit Committee Report

Dear Shareholder

I am pleased to report on the activities of the Audit Committee during the 2016 financial year.

The Audit Committee, on behalf of the Board, has taken reasonable steps to ensure that the Annual Report and Accounts 2016,
when taken as a whole, is fair, balanced and understandable.

In this Report I have detailed how the Audit Committee has discharged its responsibilities during 2016, including details of further
development of the Group’s Finance, Risk and other control functions. In addition, in 2016, the Audit Committee undertook a
rigorous and competitive audit tendering exercise, the result of which is a recommendation to re-appoint Ernst & Young, subject to
Shareholder approval at the 2017 AGM.

I would like to thank members of the Audit Committee for their support in 2016 and the active role each member played in
understanding the Group and the risks and challenges it faces.

I will be available at the 2017 AGM to answer Shareholder questions relating to the Audit Committee and how it discharged its role
and responsibilities during 2016.

David Stewart
Chairman of the Audit Committee
7th March 2017

Audit Committee
David Stewart is Chairman of the Audit Committee and its other members during the year were Mark Morris, Bill Shannon and Kumsal
Bayazit Besson. David was appointed Chairman in April 2016, the Board and Nominations Committee having determined that he has
the requisite recent and relevant financial experience as is required by the Code. Prior to David Stewart’s appointment, Mark Morris was
Chairman of the Audit Committee, a position he held since LSL’s IPO in November 2006. Mark Morris retired from the Board and its
Committees at the 2016 AGM.

Further, during the 2016 annual Board and Committees evaluation process, the Board confirmed that the Audit Committee as a whole
has the competence relevant to the sectors in which LSL operates and that it includes at least one member who has recent and relevant
financial experience.

Details of current members of the Audit Committee are set out above and detailed in the Corporate Governance Report and in Director
profiles included in The Board section of this Report.

Roles and responsibilities of the Audit Committee
During 2016, the duties of the Audit Committee included:

a. to ensure that the Group’s accounting and financial policies and controls are regularly reviewed, proper, effective and adequate;

b. to monitor the integrity of LSL’s financial statements and any formal announcements relating to its performance, reviewing significant

financial reporting issues and judgments contained in them;

c. to review the effectiveness of the internal control and risk management systems (including the overall risk management framework

and all material controls, including financial, operational and compliance related controls);

d. to approve the Internal Audit programme, including its linkage to Group risks, and to assess the effectiveness of the Risk and Internal

Audit functions (including the appointment and removal of the Group’s Head of Risk and Internal Audit);

e. to ensure that internal and external auditing processes are properly co-ordinated and work effectively and to oversee the relationship

with the external auditor, including reviewing the scope and results of audits;

f. to make recommendations to the Board (for it to put to the Shareholders for their approval at a general meeting) on the appointment,
re-appointment, or removal of the external auditor and to approve the remuneration and terms of engagement of the external auditor;

g. to review and monitor the external auditor’s independence and objectivity and the effectiveness of the audit process, taking into

consideration relevant UK professional and regulatory requirements;

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h. to keep under review LSL’s policy on the engagement of the external auditor to supply non-audit services, taking into account relevant
ethical guidance regarding the provision of non-audit services by the external audit firm, and to report to the Board, identifying any
matters in respect of which it considers that action or improvement is needed and to make recommendations as appropriate;

i. to consider and review the findings of the external auditors (including any management letters) and/or internal investigations and

management’s response to those findings and investigations;

j. to review the arrangements by which staff may, in confidence, raise concerns about possible improprieties in matters of financial
reporting or other matters with the objective of ensuring that arrangements are in place for proportionate and independent
investigation of such matters and appropriate follow up action;

k. to meet with the Board formally at least twice each year to discuss matters such as the Annual Report and Accounts, the relationship

with external auditors and other matters within its duties and responsibilities; and

l. to consider any other matters specifically referred to the Audit Committee by the Board and to report to the Board on how it has

discharged its responsibilities.

In carrying out its duties, the Audit Committee took into account the requirements of the Listing Rules (together with any requirements issued
by the FCA), the Code and the Guidance on Audit Committees issued by the FRC and updated in April 2016, together with any requirements of
the Board, and any other relevant ethical guidance, each of which are incorporated in the Audit Committee’s Terms of Reference by reference
to them. In particular, the Audit Committee updated its Terms of Reference in July 2016 and November 2016 to ensure compliance with the
revised April 2016 edition of the Code. The Audit Committee also established a programme of work to ensure that each of its responsibilities
was covered adequately during the year.

What the Audit Committee did in 2016
The Audit Committee met three times in 2016. Amongst other matters, during these meetings the Audit Committee:

a. reviewed the annual financial results and the preliminary results announcement for 2015 and the interim results for 2016 including

evaluating the going concern and viability statements included in the results;

b. received and considered, as part of the review of the annual financial statements and interim results, reports from the external auditor
in respect of their review of the annual financial statements and interim results, the audit plan for the year and the results of the annual
audit. These reports included the scope of the interim review and annual audit, the approach to be adopted by the external auditor to
address and conclude upon key estimates and other key audit areas, the basis on which the auditor assesses materiality, the terms
of engagement for the external auditor and an ongoing assessment of the impact of future accounting developments on the Group;

c. led a formal and rigorous competitive tender process in relation to the re-appointment of the external auditor and made a

recommendation to the Board to be put forward to Shareholders at the 2017 AGM in relation to the re-appointment of Ernst & Young
as LSL’s external auditors. In addition, the Audit Committee considered the quality, effectiveness and independence of the external
audit, the results of which were taken into account in recommending the re-appointment of Ernst & Young as external auditor;

d. considered the effectiveness of internal audit and agreed the annual Risk and Internal Audit plan, including compliance with both

internal standards and external regulatory requirements, and its linkage to Group risks, plus engagement with external consultants on
specialist areas as appropriate;

e. received and considered regular reports from the Risk and Internal Audit Team with regard to the control environment of the Group

and evaluated the resourcing, role and independence of the Risk and Internal Audit Team;

f. considered the review of material business risks, including reviewing internal control processes used to identify and monitor principal

risks and uncertainties. An update of the Group’s principal risks and uncertainties was presented to the Audit Committee for
discussion at each meeting and during the year the Audit Committee supported the Board in its robust assessment of LSL’s principal
risks and the continued development of the Group’s risk appetite terms of reference, framework, and statement;

g. oversaw the Group’s viability statement taking into account the principal risks and uncertainties impacting the Group;

h. evaluated areas for the continued development of financial control structures, including client accounting, treasury routines, payment
processes, sales invoicing enhancement and improved Group Finance oversight routines (including the development of the Group’s
accounting policies and finance manual);

i. conducted post-implementation reviews for major IT systems rollouts and enhanced the controls relating to the approval and

monitoring of capital expenditure relating to investments (including technology);

j. continued to develop the systems and controls in place with regard to valuations carried out by the Surveying Division, including client

on-boarding routines;

k. reviewed the Group’s compliance with regulatory requirements relevant to the Group’s businesses;

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Audit Committee Report

l. In relation to the Financial Services business, the Audit Committee received reports from the Group’s Financial Services Management

Committee (FSMC) and Financial Services Risk Committee (FSRC) and considered the focus of second-line financial services
compliance planning following the restructuring of the Financial Services Compliance Team;

m. implemented enhancements to the Group’s information security and business continuity arrangements;

n. reviewed the effectiveness of the Group’s whistleblowing policy, including logs of any whistleblowing-related incidents;

o. reviewed the Audit Committee’s composition and confirmed that as a whole it has the competence relevant to the sectors in which
LSL operates and that at least one member of the Audit Committee has recent and relevant financial experience to ensure that it is
able to fulfil its responsibilities effectively; and

p. reviewed the Audit Committee’s Terms of Reference and the Group’s Auditor Independence Policy in addition to carrying out an

annual review of the Audit Committee’s performance.

Annual Report and Accounts 2016
In relation to this Report, the Audit Committee has considered this Report, including the Financial Statements in the context of fairness,
balance and understandability to ensure that the Committee was in a position to report to the Board that the Annual Report and Accounts
2016 when taken as a whole is fair, balanced and understandable and provides the information necessary for Shareholders to assess
LSL’s position and performance, business model and strategy. This assessment was on the basis that the description of the business is
consistent with the Audit Committee’s own understanding, the risks reflect the issues that concerned the Audit Committee, appropriate
weight has been given to the ‘good and bad’ news, the discussion of performance properly reflects the ‘story’ of the year and that there is
a clear and well-articulated link between all areas of disclosure.

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Significant issues considered in relation to the Financial Statements
During the year the Audit Committee, the Management Team and the Head of Risk and Internal Audit together with the external auditor
considered and concluded on what the significant risks and issues were in relation to the Financial Statements and how these would be
addressed. Areas of particular focus during the year have been:

Significant issues in financial
reporting for 2016

Revenue recognition

How the Audit Committee addressed these issues

Revenue recognition is an area of judgment and a misstatement could be material to the Group although the nature
of the revenue recognised in the Group is not considered complex.

The Group sells a number of different products and services and operates in multiple locations throughout the UK.

Certain subsidiaries sell life assurance products which are cancellable without a notice period, and if cancelled
within a set period require that a portion of the commission earned must be repaid. The lapse provision is
recognised as a reduction in revenue and includes estimation uncertainty. As such it is possible that management
bias could be used to influence the amount of revenue that is reported.

LSL’s Risk and Internal Audit Team performed financial control audits on all key subsidiaries in 2016 which included
focus on the revenue cycle with findings reported to the Audit Committee.

Provision for PI Costs relating to
valuation services

This is an area of significant judgment and estimation and provides scope for management bias. During 2016,
management continued to undertake a detailed review on a case-by-case basis of all notifications and claims
relating to this period, in addition to any developments arising from cases received in previous years.

The review has also included an assessment of the claims and notifications on a case-by-case basis by specialist
external legal counsel.

Given the materiality of the PI Costs provision, the Board receives details of these reviews at each meeting,
including the status of existing claims and the number and nature of any new claims. The Group has historically
experienced a high level of claims relating to the 2004 to 2008 high risk lending period, and valuations work
undertaken during this period continues to result in claims being made against the Group.

There is a risk that the provision for these claims is significantly different as a result of variations from key
assumptions, in particular the incidence of claims, the propensity for claims to result in financial loss and the
resultant loss per claim.

The Audit Committee also commissioned the Risk and Internal Audit Team to complete two reviews of this work
and during the year further improvements to the management and reporting of claims and notifications have also
continued.

The results of both of these reviews were presented to the Audit Committee and the Board.

Acquisition accounting

During the year, the Group completed the acquisition of Group First, nine lettings books and one franchisee buy
back.

Client monies accounts with regard
to the Lettings businesses

Subject to deal structure, there may be a risk of inappropriate purchase price allocations, of incorrect recognition
or intangible assets and goodwill, or incorrect treatment of any earn-out arrangements and of the miscalculation of
contingent consideration.

The Audit Committee has reviewed the way in which intangibles and goodwill are recognised, and the treatment
of earn-out and other contingent consideration. In undertaking this review, the views of the external auditors was
considered in detail. In relation to the Group First acquisition in February 2016, the Audit Committee discussed in
detail the recognition of the intangible assets and sought advice from the external auditors as appropriate.

The Group holds client monies in its Lettings businesses. Neither the client monies, nor the matching liabilities
to such clients are included in the Group balance sheet, as the Group is not entitled to the benefit from the use
of the amount held in these accounts. The Group does have a responsibility to ensure that the money held in
the client accounts is accounted for accurately and, if required, the Group would make good any shortfall. The
client accounts are reconciled at regular intervals (including daily exercises for the larger businesses). The Risk
and Internal Audit Team perform regular client account audits, the findings of which are reported to the Audit
Committee.

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Audit Committee Report

Other Financial Statement
matters considered by the Audit
Committee

Going concern

Viability statement

How the Audit Committee addressed these matters

Management prepared detailed papers for consideration by the Audit Committee on the ability of the Group to
continue as a going concern. This considered the likely future profitability of the Group, a forecast of future cash-
flows, the impact of banking covenants, liquidity of investments and joint ventures and the ability of the Group to re-
finance any loans (in addition to the Group’s facility which was renewed and extended in 2016 and is due to mature
in May 2020) where necessary.

The key judgments, assumptions and estimates underpinning this review were discussed and considered.
Following the review, the Audit Committee was able to conclude that the adoption of the going concern principle
was justified for the foreseeable future.

Management also provided the Audit Committee with a paper on the financial viability of the Group, which was
determined over a three year period, using assumptions consistent with the period of the Group’s strategic plan. This
paper included a review of the principal risks, and considered which of these risks might threaten the Group’s viability. It
also considered and modelled a number of severe but plausible scenarios.

The scenario modelling included a significant downturn in the residential property market, in addition to other conflating
smaller risks, and took into account the Group’s ability to re-finance its facility, which is due to mature in May 2020.

The key judgments, assumptions and modelling underpinning the review were discussed and considered. Following
the review, the Audit Committee was able to approve the statement and recommend its adoption by the Board.

Treatment of exceptional items

The Audit Committee has, in line with FRC guidance, continued to review the Group’s accounting policy with regard to
the classification of items as exceptional.

Available for sale assets

The Group holds minority shareholdings in VEM and GPEA. The Audit Committee has considered the fair value of these
holdings for the inclusion in the Group’s balance sheet.

Impairment of goodwill and
intangible assets

On an annual basis, management provide the Audit Committee with a paper supporting the review of goodwill to
assess whether any impairment is required.

Based on the work performed, the Audit Committee was able to conclude that no impairment was necessary to the
goodwill or intangible assets as at 31st December 2016. Further information is provided in the Notes to the Financial
Statements.

Taxation

The Audit Committee has received reports from the Management Team on the tax provisions recorded in the Financial
Statements and assessed the appropriateness of the balances held. LSL’s tax strategy, which is due to be published in
2017, has been reviewed by the Audit Committee.

Misstatement due to fraud and
error

Management submit regular reports and updates to the Audit Committee on the Group’s fraud prevention
arrangements, including details of any instances of any actual or suspected circumstances.

LMS

The Group acquired 33.33% of LMS in 2011 and increased its holding to 50% during 2014 and 2016 with part of the
contingent consideration for the 2016 acquisition deferred for payment in 2018, based on LMS’s performance in 2017.
The Audit Committee reviewed the calculations of the contingent consideration before payment was made.

Appointment of external auditor
During the year, the Audit Committee led the completion of a competitive audit tendering exercise and conducted a review of the auditor’s
effectiveness, independence and objectivity.

Audit tender
The Audit Committee undertook a comprehensive audit tender process, including a shortlist of three audit firms. The shortlisted firms
were invited to meet with management, submit written submissions and then presented to a sub-committee of the Audit Committee. The
principal evaluation criteria included a detailed consideration of the proposed audit approach, experience of the team and the proposed
audit partner, industry experience, geographic coverage, cultural fit as well as overall quality and value for money. In making its decision the
Audit Committee’s most important criteria was the quality of the audit.

The Audit Committee provided the Board with a shortlist of two preferred audit firms, concluding with a recommendation to re-appoint Ernst
& Young. The recommendation was made free from any influence by a third party and no contractual term of the kind mentioned in Article
16(6) of the Audit Regulation has been imposed on LSL.

Ernst & Young have acted as LSL’s external auditors since 2004 with a previous tendering exercise undertaken in 2007. Whilst Ernst & Young
were eligible to participate in the 2016 tendering exercise, their total term is subject to a 20 year cap commencing in 2004, which is when the
MBO from Aviva Life was completed. Accordingly, Ernst & Youngs’ term will expire in 2024 and LSL will complete a tendering exercise ahead
of this, and Ernst & Young will not be eligible to participate in this exercise.

LSL AR 2016_Sect1-3 B&C.indd 50

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Ernst & Young’s Audit Engagement Partner is Alistair Denton who has held the role since 2013. Alistair will be replaced as Audit Partner by
Mark Morritt with effect from 1st January 2017, subject to Shareholders approving the re-appointment of Ernst & Young at the 2017 AGM.

Auditor effectiveness, independence and objectivity
In making its assessment of the effectiveness of the external audit, the Audit Committee reviewed the external audit findings and the
Management Team’s responses to these findings. In addition, the audit tendering exercise benchmarked the quality and effectiveness of the
services provided by Ernst & Young, as the incumbent auditor against those offered by other firms, with the aim of obtaining the best quality
and most effective audit. Further discussions were held with the Risk and Internal Audit Team and the Management Team with regard to the
effectiveness of the audit process.

Auditor appointment
Taking into consideration the audit tendering exercise and the audit effectiveness review, the Audit Committee, acting on behalf of the
Directors, has concluded that Ernst & Young is effective, independent and objective, and based on this conclusion, the Board has resolved
to recommend to Shareholders the re-appointment of Ernst & Young as external auditor at the 2017 AGM and to seek authority for the
Directors to agree the external auditor’s remuneration.

Auditor Independence Policy
To guard against the objectivity and independence of the external auditors being compromised, the Audit Committee has adopted a policy
under which any non-audit related services provided by the external auditors must be approved by the Audit Committee or be within a
pre-approved category and a pre-approved fee limit (Auditor Independence Policy). The Audit Committee is kept regularly informed of the
fees paid to the auditor in all capacities. The Auditor Independence Policy, which takes into account relevant ethical guidance regarding
the provision of non-audit services by external audit firms, was reviewed and updated during 2016, specifically taking into account the April
2016 Guidance on Audit Committees.

Both the previous Auditor Independence Policy and the revised policy, which is effective from 1st January 2017 provide that the following
categories of fee need pre- approval from the Audit Committee:

a. any fee for specific non-audit services which exceed £25,000; and
b. any fee which has a contingent element.

In addition, the policy provided that the total annual fees for non-audit work allocated to the external auditor shall not exceed the average
audit fee paid during the preceding three years (consecutive).

The Auditor Independence Policy stipulates restrictions and procedures in relation to the potential allocation of non-audit work to the auditor.
These include categories of work which may and may not be allocated to the auditor, subject to certain provisions as to materiality, nature of
and competency to perform work.

A copy of the Auditor Independence Policy is available from the Company Secretary and LSL’s website (www.lslps.co.uk).

The split between audit and non-audit fees for 2016 appears at Note 10 to the Financial Statements. The non-audit fees amounted to
£59,000 (2015: £85,000) compared with audit fees and other assurance related services fees of £290,600 (2015: £432,300). This is in
line with the provisions of the Auditor Independence Policy. The non-audit fees for the current and prior year relate to taxation services
and services to support conversion to FRS 101. The Audit Committee concluded it was in the interests of LSL to procure these non-audit
services from Ernst & Young because of their existing knowledge and understanding of the Group’s structure.

Internal controls
The Board has overall responsibility for LSL’s system of internal controls and for reviewing its effectiveness. The system of internal controls
is subject to an ongoing process of change and improvement, and was originally designed in accordance with the guidance of the Turnbull
Committee on Internal Controls and it is regularly reviewed. It was updated in 2015 and developed further in 2016 to ensure continued
compliance with the guidance set out in the September 2014 FRC “Guidance on Risk Management, Internal Control and Related Financial
and Business Reporting”.

The arrangements in place for 2016 sought to identify, evaluate and manage significant risks faced by LSL, including assessments by
the Board and the Executive Committee of risk appetite levels and measures to define levels of existing risk in relation to this appetite.
Where necessary, remedial steps needed to bring risk areas within appetite were considered. The system aims to manage, rather than
eliminate, the risk of failure to achieve business objectives and can provide only reasonable, and not absolute, assurance against material
misstatement or loss.

Internal control facilitates the effectiveness and efficiency of LSL’s operations, helps to ensure the reliability of internal and external reporting
and assists compliance with laws and regulations. The internal controls are also in place to safeguard both Shareholder investment and
LSL’s assets.

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Audit Committee Report

In order to discharge this responsibility, the Board has established the procedures necessary to apply both the Code and relevant FRC
guidance, including clear operating procedures, distinct lines of responsibility and delegated authorities. LSL’s risk management and internal
control procedures and framework has continually evolved since LSL was listed on the London Stock Exchange in 2006 and is regularly
reviewed by the Board and the Audit Committee and continues to be in place up to the date of this Report. The risk framework continued to
evolve in 2016 in line with emerging best practice and will continue to develop during 2017.

LSL’s risk management and internal control framework is made up of the following parts:

a. ownership of the risk management and internal controls framework by the Board, including a risk framework policy, supported by the

Group Chief Financial Officer, the Company Secretary, the Head of Risk and Internal Audit and the Group Financial Controller;

b. a network of risk owners in each of LSL’s businesses with specific responsibilities relating to risk management and internal controls;

c. the documentation and monitoring of risks are recorded and managed through standardised risk registers which undergo regular

reviews and scrutiny by local boards and the Head of Risk and Internal Audit;

d. the Board regularly identifies, reviews and evaluates the principal risks which may impact the Group as part of the planning and reporting

cycle to ensure that such risks are identified, monitored and mitigated;

e. the development and application of LSL’s risk appetite statement and associated framework (for further details on steps taken during the

year, please see Principal Risks and Uncertainties on pages 22 to 25); and

f. reporting by the Chairman of the Audit Committee to the Board on any matters which have arisen from the Audit Committee’s review of
the way in which the risk management and internal control framework has been applied together with any breakdowns in, or exceptions
to, these procedures.

LSL has in place a Group-wide risk appetite statement and risk framework which will continue to be developed in 2017. This risk framework
includes the following:

a. risk framework policy;

b. determination of risk appetite and management or mitigation of risks in line with risk appetite tolerances;

c. assessment of prospects and viability;

d. review of effectiveness of the risk management and internal control systems; and

e. going concern confirmation (for LSL’s going concern disclosure please refer to the Report of the Directors).

Further details of LSL’s assessment and evaluation of principal risks and uncertainties together with details of key mitigation initiatives are set
out in the Strategic Report on pages 22 to 25.

The Group also has in place internal control and risk management systems in relation to LSL’s financial reporting procedures and the
process for preparation of consolidated accounts. These systems include policies and procedures to facilitate the maintenance of records
that accurately and fairly reflect transactions, provide reasonable assurance that transactions are recorded as necessary to permit the
preparation of financial statements in accordance with IFRS or UK Generally Accepted Accounting Principles, as appropriate, and that
require reported data to be reviewed and reconciled.

LSL operates a ‘three lines of defence’ structure to facilitate effective oversight of Group operations. The risk framework includes delegated
authority levels and functional reporting lines and accountability. LSL also operates a budgeting and financial reporting system to compare
actual performance to latest forecast, budget and to the previous year on a monthly basis. In addition, the Executive Directors receive
daily information on sales activity and weekly information on key result areas. All capital expenditure and other purchases are subject to
appropriate authorisation procedures, with centralization of several payment functions in 2016.

In addition, LSL established the FSMC and the FSRC which are both Executive Committees with roles and responsibilities relating to the
management of LSL’s FCA regulated Financial Services businesses. Equivalent governance bodies also exist for other business operations,
for example, the Estate Agency Management Committee and Surveying Valuation Controls Board. The Audit Committee and the Board
receives regular reports from the FSMC and FSRC along with updates from the Group’s Executive Committee, whose focus also includes
the monitoring of key performance indicators in relation to LSL’s key customer groups, being consumers and key lender clients.

During 2016 the Executive Directors have regularly identified, evaluated and managed the principal risks and uncertainties which could
adversely affect LSL’s business, operating results and financial condition. The effectiveness of the internal control system and risk
management process is kept under review by the Audit Committee and has been reviewed by the Board during 2016 as part of an annual
review which considered the effectiveness of the risk management arrangements and internal control systems. This review covered all
material controls, including financial, operational and compliance controls. In addition, LSL’s Risk and Internal Audit Team regularly submits
reports to the Audit Committee and this, together with the internal controls system and risk management process in place within LSL, allows
the Board to monitor financial and operational performance and compliance with controls on a continuing basis and to identify and respond
to business risks as they arise.

LSL AR 2016_Sect1-3 B&C.indd 52

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During the year the Audit Committee continued reviewed improvements to the controls environment, in particular the effectiveness of the
Group Finance function as a second line of defence. In addition, in 2016 the Group established a dedicated Estate Agency Compliance
Team, centralised some of the Estate Agency customer service arrangements, and restructured the Financial Services second-line
structures.

The principal risks and uncertainties facing LSL together with details of key mitigation initiatives are set out in the Strategic Report on pages
22 to 25.

The Audit Committee Report is approved by and signed on behalf of the Board of Directors

David Stewart
Chairman of the Audit Committee
7th March 2017

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Directors’
Remuneration Report

Annual Statement

Dear Shareholder

This Report sets out the proposed remuneration policy for the Directors and discloses amounts paid to individuals who were members
of the Board over the course of the year ended 31st December 2016.

This Directors’ Remuneration Report is divided into the following three sections:

• Annual Statement: summarising and explaining the major decisions on, and any substantial changes to the Directors’ remuneration

in the year;

• Directors’ Remuneration Policy: setting out the proposed policy being presented for Shareholder approval at the 2017 AGM; and

• Annual Report on Remuneration: setting out the remuneration earned by the Directors in the year ended 31st December 2016 and

how the proposed Directors’ Remuneration Policy will be implemented in 2017.

The Directors’ Remuneration Policy (Policy) is subject to a binding vote every three years or sooner if any changes are made to the
Policy prior to the expiry of the three years. The Policy was submitted to and was approved by Shareholders at the 2014 AGM and,
accordingly, it is being submitted for its triennial binding Shareholder vote at the 2017 AGM.

The Annual Statement and Annual Report on Remuneration are subject to an annual Shareholder advisory vote and will also be
presented to Shareholders at the 2017 AGM. Please see the AGM Notice for further details on these resolutions.

Summary of LSL’s performance in the year
In 2016, following a strong first half, LSL delivered a resilient second half performance given the changing market conditions and the
2016 bonus awards for the eligible Executive Directors’ reflect this. 80% of the 2016 bonus scheme was based on LSL’s budgeted
Group Underlying Operating Profit and 20% on individually agreed non-financial measures. During 2016, the Executive Directors’ bonus
scheme was subject to a cap of 100% of basic salary.

Based on LSL’s performance in 2016, eligible Executive Directors did not receive an annual bonus in respect of the financial
performance element of the bonus scheme. However, they did receive between 70% and 80% of the available 20% of basic salary
for performance against their individual non-financial measures. These non-financial measures have been critical in driving strategic
initiatives.

Ian Crabb’s 2014 LTIP award is not expected to vest during 2017. This is because the challenging Earnings Per Share (EPS)
performance targets have not been met and the Remuneration Committee considers it unlikely that the Total Shareholder Return (TSR)
targets will be met when they are measured during March 2017. Further details of performance against the targets set for the incentive
awards are set out in the Annual Report on Remuneration.

Summary of key decisions in the year and implementation of the Policy in 2017
The Remuneration Committee regularly reviews Executive Director and senior management remuneration including the Policy,
to ensure it promotes the attraction, motivation and retention of high quality executives who are key to delivering LSL’s strategy,
sustainable earnings growth and Shareholder return. The Remuneration Committee’s review of the Policy which was conducted in
2016 included an extensive and informative Shareholder consultation process. This review concluded that whilst the current Policy
remains broadly appropriate, a limited number of changes would provide some flexibility for the next three years and ensure that
LSL’s remuneration arrangements are aligned with current best practice.

Summary of proposed Policy changes
In summary, the proposed key changes to the Policy are as follows:

• The annual bonus maximum opportunity under the Policy, for the Group Chief Executive Officer only, will increase from 100%
of salary to 125% of basic salary. There is no intention, at this time, to increase the actual maximum opportunity for the Group
Chief Executive Officer but this will provide some headroom for the three year Policy period. The maximum opportunity for other
Executive Directors will remain at 100% of basic salary. No increases will be made within the Policy without consulting with LSL’s
significant Shareholders. In the event that the maximum opportunity is increased above 100% of basic salary, it will be subject to the
requirement that part of the annual bonus is deferred into Shares with the remainder paid in cash.

LSL AR 2016_Sect1-3 B&C.indd 54

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• The LTIP maximum award limit under the Policy for all Executive Directors will increase from 100% to 125% of basic salary. There is

no intention, at this time, to increase the current award levels of 100% of basic salary but again this provides some headroom for the
three year Policy period. No increases will be made within the Policy without consulting with LSL’s significant Shareholders.

• Reducing the level of threshold vesting from 35% to 25% for the TSR element of the LTIP award. The EPS part which is currently at

25% will remain at this level.

• Increasing the Executive Directors’ alignment with Shareholders and the long-term performance of LSL, by increasing the level of

required shareholding in the share ownership guidelines and introducing post-vesting holding periods.

• Increasing flexibility within the Policy to enable the Remuneration Committee to select performance measures for the annual bonus

and long-term incentive that are aligned with the strategy of LSL.

All of the changes, including those referred to above, are summarised in the Policy table on page 56. A small number of other minor
changes are also being made. The changes to the LTIP maximum award limit will require a change to the LTIP rules and a resolution
to make this amendment will be presented to Shareholders for approval at the 2017 AGM. Further details are set out in the AGM
Notice.

As part of the Policy review the Remuneration Committee agreed the implementation of the Policy for 2017, details of which are set
out in the Annual Report on Remuneration. Small salary increases have been awarded to the Executive Directors in line with the
general workforce, and the annual bonus maximum opportunity and long-term incentive awards levels will remain at 100% of base
salary. The financial performance measures for the annual bonus and the LTIP will remain the same as in 2016, being Underlying
Operating Profit for the annual bonus and EPS and relative TSR for the LTIP awards. The Remuneration Committee has approved
a change to the current FTSE 250 relative TSR group to be used for the 2017 and future LTIP awards. This new group comprises of
23 companies that operate in similar business and sectors to LSL and as such will reflect relative performance of LSL to its peers.
Further details are set out in the Annual Report on Remuneration.

Appointment of Helen Buck as Executive Director – Estate Agency
The Remuneration Committee agreed the remuneration package for Helen Buck on her appointment as Executive Director – Estate
Agency on 2nd February 2017. Helen’s remuneration is set in accordance with the Remuneration Policy and comprises a base salary
of £300,000 and a maximum annual bonus opportunity and long-term incentive award in line with the other Executive Directors each
of 100% of salary.

Payments to past Directors
Adrian Gill stepped down from the Board on 4th January 2017. Adrian was paid salary, benefits and pension to the date of cessation
of his employment with LSL, being 4th January 2017. No annual bonus will be paid for the 2016 financial year or for the four days of
service in 2017 and all unvested incentive awards lapsed on cessation of his employment.

The Remuneration Committee also confirmed the vesting and exercise of the LTIP award held by David Newnes, who retired from
the Board on 31st December 2014. The vested Shares were subject to normal performance conditions and pro-rated to reflect his
termination date, in line with his good leaver status.

In addition to the above, the Remuneration Committee also dealt with a compensation payment made to Steve Cooke who left LSL
in 2014. No loss of office payments were made at that time. The Remuneration Committee approved a compensation payment to Mr
Cooke to settle a claim for his unpaid notice period. The Remuneration Committee took legal advice on this matter and agreed it was
in the best interests of LSL and its Shareholders to make the compensation payment.

The Remuneration Committee ensures that the remuneration arrangements for the Executive Directors and senior managers are
aligned to LSL’s strategic goals and key performance indicators. Further, the Remuneration Committee believes that the proposed
revised Policy will continue to promote the long-term success of LSL and incentivise the delivery of strong yet sustainable financial
results with the creation of Shareholder value.

The Remuneration Committee trusts that Shareholders will support the resolutions to approve LSL’s remuneration arrangements
at the 2017 AGM. If Shareholders have any questions or observations then I will be pleased to hear from Shareholders. I can be
contacted via the Company Secretary’s office (please see details on page 159).

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Bill Shannon
Chairman of the Remuneration Committee
7th March 2017

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Directors’ Remuneration Report

Remuneration Policy

Remuneration Policy approved by Shareholders at the 2014 AGM
The current Policy which is effective until the new proposed Policy is approved by Shareholders at the 2017 AGM is set out in the 2014 and
2015 Annual Report and Accounts, which are available on LSL’s website (www.lslps.co.uk).

Set out below is the new proposed Policy which will be put to Shareholders for approval at the 2017 AGM and is intended to be applicable
from 1st January 2017. The table included below summarises the main substantive changes between the 2014 Policy and the proposed 2017
Policy. A small number of other minor changes are also being made.

Summary of proposed Policy changes
The table below summarises the proposed changes to the 2014 Policy.

Element of Policy

Current Policy

New Policy

LTIP performance metrics

• Adjusted Basic EPS growth targets; and/ or

relative TSR targets.

• 25% vests at threshold (35% for TSR) increasing to

• At least 30% of the award will be determined by TSR
performance with the remainder by other financial
metrics.

100% at maximum.

• 25% will vest at threshold for all parts of the LTIP

award.

• Discretion for the Remuneration Committee to provide
for dividend equivalents to accrue from the date of an
award to the end of any post-vesting holding period.

• The Remuneration Committee will have the discretion
to adjust the LTIP vesting outcome if it considers it is
not reflective of the underlying performance of LSL.

• No post-vesting holding periods under the current

• As and when LTIP awards are made in excess of 100%

LTIP post-vesting holding
periods

Share ownership guidelines

Policy.

• 100% of basic salary to be achieved within three
years of appointment through the retention of
vested Shares and/or through open market
purchases.

LTIP performance metrics

• Adjusted Basic EPS growth targets; and/or relative

TSR targets

• 25% vests at threshold (35% for TSR) increasing to

of basic salary then two year post-vesting holding
periods will apply to those awards in their entirety.

• 150% of salary to be achieved within five years of

appointment through the retention of vested Shares
and/or through open market purchases. Executive
Directors are also expected to retain all vested LTIP
awards (subject to any sales necessary to meet tax
liability on vesting) until the Share ownership guideline
is met.

• At least 30% of the award will be determined by TSR
performance with the remainder by other financial
metrics.

100% at maximum

• 25% will vest at threshold for all parts of the LTIP award.

• Discretion for the Remuneration Committee to provide
for dividend equivalents to accrue from the date of an
award to the end of any post-vesting holding period.

• The Remuneration Committee will have the discretion
to adjust the LTIP vesting outcome if it considers it is
not reflective of the underlying performance of LSL.

LTIP post-vesting holding
periods

Share ownership guidelines

• No post-vesting holding periods under the current

• As and when LTIP awards are made in excess of 100%

Policy.

• 100% of basic salary to be achieved within three
years of appointment through the retention of
vested Shares and/or through open market
purchases.

of basic salary then two year post-vesting holding
periods will apply to those awards in their entirety.

• 150% of salary to be achieved within five years of

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Remuneration Policy (submitted for Shareholder approval at the 2017 AGM)

Directors’ Remuneration Policy (Policy)

Introduction and overview
The Board recognises that Directors’ remuneration is of legitimate concern to Shareholders and is committed to following current best
practice. The Group operates within a competitive environment; performance depends on the individual contributions of the Directors and
employees and LSL believes in rewarding vision and innovation.

When setting the Executive Directors’ remuneration, the Remuneration Committee endeavours to ensure that all Executive Directors are
provided with appropriate profit related pay and an element of pay relating to non-financial performance measures, in order to encourage
enhanced performance, and that they are, in a fair and responsible manner, rewarded for their individual contributions to the success of the
Group.

LSL’s policy is to provide Executive Director remuneration packages designed to attract, motivate and retain Executive Directors of the
calibre necessary to maintain and improve the Group’s profitability and to reward individuals for enhancing Shareholder value and return.
To do this, LSL aims to provide a market competitive (but not excessive) package of pay and benefits. LSL’s general policy is to set basic
salaries around mid-market levels and set performance pay levels which are at the upper quartile of market practice but with stretching
goals that accord with LSL’s general policy of seeking to make bonuses self-financing wherever possible. Remuneration packages will also
reflect the Executive Director’s responsibilities and contain incentives to deliver LSL’s objectives.

Consideration of Shareholder views
The Remuneration Committee considers Shareholder feedback received in relation to LSL’s Annual Report and Accounts, including the
Directors’ Remuneration Report, each year at a meeting following publication of the Annual Report and Accounts and the AGM Notice.
This feedback, plus any additional feedback received during any meetings with Shareholders from time to time, is then considered as
part of LSL’s annual review of the Policy and implementation. In addition, the Remuneration Committee engages directly with significant
Shareholders and their representative bodies in respect of the proposed changes to the Policy and, as appropriate, to implementation
of that Policy. Details of votes cast for and against the resolution to approve the previous year’s Directors’ Remuneration Report and any
matters discussed with Shareholders during the year are set out in the Annual Report on Remuneration. For further details of the way in
which LSL communicates with its Shareholders, please see the Shareholder Relations section of the Corporate Governance Report.

Consideration of employment conditions elsewhere in the Group
The Remuneration Committee considers the general basic salary increase for the broader UK employee population when determining
the annual salary increases for the Executive Directors and is cognisant of the Group’s overall employment arrangements when reviewing
and implementing the Executive Directors’ Remuneration Policy. The Remuneration Committee did not consult with other employees with
regard to remuneration of the Executive Directors.

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Directors’ Remuneration Report

Element

How component supports
corporate strategy

Operation

Maximum

Performance
metrics
and period

Basic salary

• Reflects the value of the
individual and their role.

effective 1st January.

• Reviewed annually, normally

• There is no prescribed

• Not applicable.

• Reflects skills and experience

• Takes periodic comparison

over time.

• Provides an appropriate level
of basic fixed income avoiding
excessive risk arising from over
reliance on variable income.

against companies with similar
characteristics and sector
comparators.

maximum annual basic salary
increase.

• The Remuneration Committee

is guided by the general
increase for the broader
employee population but
may decide to award a
lower increase for Executive
Directors or indeed exceed this
to recognise, for example, an
increase in the scale, scope or
responsibility of the role and/
or to take account of relevant
market movements.

• Current basic salary levels are

set out in the Annual Report on
Remuneration.

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Element

How component supports
corporate strategy

Operation

Maximum

Performance
metrics
and period

Annual
bonus

• Incentivises annual delivery of
financial and strategic goals.

• Maximum bonus only payable

for achieving demanding
targets.

• Targets reviewed annually.

• Group Chief Executive Officer

• Performance

capped at 125% of basic
salary.*

period of one year.

• Performance

• Other Executive Directors

metrics:

capped 100% of basic salary.

*Maximum opportunity will not
be increased above 100% of
basic salary without significant
Shareholder consultation.

- A maximum of 30%
of the award will be
determined by non-
financial measures
and a minimum of
70% by financial
measures.

- Not more than

20% of the financial
measures will pay
out at threshold.

• Bonus level is determined by
the Remuneration Committee
after the end of the relevant
financial year, subject to
performance against targets
set at the start of the year.

• The Remuneration Committee
has the discretion to adjust the
annual bonus payment made if
the Remuneration Committee
considers it is not reflective of
the underlying performance
of LSL.

• Where the Group Chief

Executive Officer’s maximum
bonus opportunity is increased
above 100% of basic salary,
a portion of the annual bonus
will be deferred in Shares, with
the balance being paid in cash.

• Not pensionable.

• Bonus awards are subject
to clawback and malus
applicable for three years
from payment of the bonus
or vesting of deferred bonus
in circumstances of: material
misstatement of financial
results, error, inaccurate or
misleading information in
determining a performance
condition or any other matter
determining the vesting of
an award, breach of relevant
regulations, an act or omission
during vesting period to
the significant detriment
of customers, or an act or
omission leading to gross
misconduct. Recovery can be
made through scaling back
of existing awards, reduction
of future awards including
under the LTIP and requesting
repayment as cash sum.

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Directors’ Remuneration Report

Element

How component supports
corporate strategy

Operation

Maximum

• Aligned to key performance

indicators of the Group
that drive the strategy and
performance of the business.

LTIP
awards
(approved by
Shareholders
at 2016 AGM,
with an
amendment
to be
approved
at the 2017
AGM)

• Normal maximum limit of 125%
of basic salary with grants of
up to 200% of basic salary
being made in exceptional
circumstances.*

*Award value will not be
increased above 100% of
basic salary without significant
Shareholder consultation.

• Awards of nil-cost or
conditional Shares are
made annually with vesting
dependent on the achievement
of performance conditions
over the subsequent three
years.

• The Remuneration Committee
reviews the quantum of awards
annually and monitors the
continuing suitability of the
performance measures.

• The Remuneration Committee

will have the discretion
to adjust the LTIP vesting
outcome if it considers that it is
not reflective of the underlying
performance of LSL.

• Discretion for the

Remuneration Committee
to provide for dividend
equivalents to accrue from
the date of award to the
vesting date or, if applicable,
to the end of any post-vesting
holding period.

• LTIP awards are subject
to clawback and malus;
applicable for six years from
vesting in circumstances
of: material misstatement
of financial results, error,
inaccurate or misleading
information in determining a
performance condition or any
other matter determining the
vesting of an award, breach
of relevant regulations, act
or omission during vesting
period to the significant
detriment of customers, act
or omission leading to gross
misconduct. Recovery can be
made through scaling back
of existing awards, reduction
of future awards including
under the annual bonus and
deferred annual bonus plan
and requesting repayment as
cash sum.

Performance
metrics
and period

• Performance

period: normally
three years.

• As and when LTIP
awards are made
in excess of 100%
of basic salary,
then two year
post-vesting
holding periods
will apply to those
awards in their
entirety.

• At least 30% of

the award will be
determined by
TSR performance
with the remainder
by other financial
metrics.

• 25% vests at

threshold for all
parts of the LTIP
increasing to 100%
at maximum.

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Element

How component supports
corporate strategy

Operation

Maximum

Performance
metrics
and period

All-employee
Share
schemes:
SAYE, SIP/
BAYE and
CSOP

Executive
Share
ownership
guidelines

• Encourages long-term
shareholding in LSL.

• Invitations made by the

• As per HMRC limits.

None.

Remuneration Committee
under the approved SAYE,
SIP/BAYE and CSOP.

• To provide alignment between

• Executive Directors are

• Minimum of 150% of basic

None.

Executive Directors
and Shareholders.

salary – no maximum.

required to build and maintain
a minimum shareholding
equivalent to 150% of basic
salary over a period of
five years from the date of
appointment through the
retention of vested Share
award and/or through open
market purchases.
Executive Directors are
expected to retain all vested
long-term incentive awards
(subject to any sales necessary
to meet tax liability on vesting
or exercise) until the guideline
is met.

Benefits

• Provides insured benefits
to support the Executive
Directors and their family
during periods of ill health,
accident or death.

• Includes car allowance, life

• At cost.

None.

assurance and private medical
insurance. Other benefits
may be provided where
appropriate.

• Access to car allowance to

• Any reasonable business

facilitate travel.

related expenses (including tax
thereon) can be reimbursed
if determined to be a taxable
benefit.

Pension

• Provides modest retirement

• Defined contribution.

benefits.

• Opportunity for Executive

Directors to contribute to their
own retirement plan.

• HMRC approved arrangement.

None.

• New employees are offered a
pension in accordance with
auto enrolment minimums.
The Remuneration Committee
may use its discretion on
the appointment of a new
Executive Director
to recommend a 5% match of
basic salary.

Chairman
and Non
Executive
Directors

• To provide fees reflecting
time commitments and
responsibilities of each role,
in line with those provided by
similarly sized companies.

• Cash fee paid on a monthly

• There is no prescribed

None.

basis.

• Fees are normally reviewed

from time to time.

• Any reasonable business

related expenses (including tax
thereon) can be reimbursed
if determined to be a taxable
benefit.

maximum annual fee increase,
although the total fee cap is
£750,000.

• Decisions on fee levels are

guided by the general increase
for the broader employee
population, scale, scope
or responsibility of the role
and/or to take account of
relevant market movements.
Current fee levels are set
out in the Annual Report on
Remuneration.

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Directors’ Remuneration Report

Notes to the Remuneration Policy summary:
1. A description of how LSL will operate the Policy in 2017 is detailed in the Annual Report on Remuneration.

2. The following differences exist between LSL’s Policy for the remuneration of Executive Directors as set out in the table and its approach

to the payment of LSL employees generally:

a. A lower level of maximum annual bonus (or no bonus) opportunity may apply to employees other than the Executive Directors.

b. Participation in the LTIP is limited to the Executive Directors and certain selected senior managers. All employees are eligible to

participate in LSL’s employee share schemes: save as you earn (SAYE), self-invested plan/buy as you earn (SIP/BAYE); and company
share ownership plan (CSOP) upon invitation.

c. Benefits that are offered to other employees generally comprise of paid holidays and voluntary benefits such as childcare vouchers, a

health cash plan, life assurance and, for more senior managers, private medical insurance.

d. LSL offers a stakeholder pension scheme with employee and employer contributions for new members calculated at a level which

is compliant with automatic enrolment minimums (increasing over time as required by legislation) and based on a band of qualifying
earnings which may vary month by month as variable pay fluctuates. Senior employees are offered the opportunity to join the
enhanced scheme after one years’ service; this enables a 5% match of basic salary. The Remuneration Committee may use its
discretion on the appointment of new Executive Directors to recommend a 5% match of basic salary.

In general, the above listed differences arise from the development of remuneration arrangements that are market competitive for the
various categories of individuals, together with the fact that remuneration of the Executive Directors and selected senior managers
typically has a greater emphasis on performance-related pay.

3. The choice of the performance metrics applicable to the annual bonus scheme reflect the Remuneration Committee’s belief that any

incentive compensation should be appropriately challenging and tied to both the delivery of profit and non-financial measures.

4. The TSR and EPS performance conditions applicable to the LTIP were selected by the Remuneration Committee on the basis that they
reward the delivery of long-term returns to Shareholders and the Group’s financial growth, and they are consistent with LSL’s objective
of delivering superior levels of long-term value to Shareholders. The TSR performance condition is monitored on the Remuneration
Committee’s behalf by New Bridge Street (NBS) whilst LSL’s EPS growth is derived from the audited Financial Statements.

5. The Remuneration Committee operates the LTIP in accordance with the plan rules and the Listing Rules of the UKLA and the

Remuneration Committee terms of reference are consistent with market practice; this retains discretion over a number of areas relating
to the operation and administration of the plan. The Remuneration Committee has the discretion under the plan rules, in certain
circumstances, to grant and/or settle an award in cash. In practice this will only be used in exceptional circumstances for Executive
Directors.

6. While LTIP awards currently vest after three years, subject to continued service and performance targets, the Remuneration Committee

will consider developments in best practice when setting future LTIP award grant policies.

7. The employee Share schemes (SAYE, SIP/BAYE and CSOP) do not include any performance conditions.

8. For the avoidance of doubt, in approving the Policy, authority is given to LSL to honour any commitments entered into with current or
former Executive Directors (such as the payment of a pension, payment of last year’s annual bonus or the vesting/exercise of Share
awards granted in the past) that have been disclosed in this and previous remuneration reports. Details of any payments to former
Directors will be set out in the Annual Report on Remuneration as they arise.

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Reward scenarios (illustration of application of Remuneration Policy for fi nancial year 2017)
The chart below shows how the composition of each of the remuneration packages, as applicable for each of the Executive Directors
currently holding offi ce, varies at diff erent levels of performance under the Policy set out above; both as a percentage of total remuneration
opportunity and as a total value:

s
0
0
0
’
£

£1,400

£1,200

£1,000

£800

£600

£400

£200

£0

£1,235

32%

£875

23%

£435

27%

Fixed Pay

Bonus

LTIP

£886

£871

£625

33%

£615

33%

£306

23%

28%

33%

£301

23%

28%

33%

100%

50%

36%

100%

49%

34%

100%

49%

34%

Below Target

Target

Maximum

Below Target

Target

Maximum

Below Target

Target

Maximum

Group Chief Executive Offi cer

Group Chief Financial Offi cer

Executive Director

Notes to the reward scenarios:
1. The ‘below target’ performance scenario comprises the fi xed elements of remuneration only, including:

a. basic salary, applying from 1st January 2017, or on appointment;

b. pension, as per the Policy; and

c. estimated benefi ts using the value reported for the previous fi nancial year.

2. The target level of bonus is taken to be 60% of the maximum bonus opportunity (100% of basic salary), and the on-target level of LTIP
vesting is assumed to be 50% of the face value, assuming a normal grant level (100% of basic salary). These values are included in
addition to the components/values of minimum remuneration.

3. Maximum remuneration assumes full bonus pay-out (100% of basic salary) and the full face value of the LTIP (100% of basic salary), in

addition to fi xed components of remuneration.

4. No Share price growth has been factored into the calculations.

5. The assumptions noted for ‘on-target’ performance in the graph above are provided for illustration purposes only.

Approach to recruitment and promotions
The remuneration package for a new Executive Director will be set in accordance with the terms of LSL’s prevailing approved Policy at the
time of appointment and take into account the profession, skills and experience of the individual, the market rate for a candidate of that
experience and the importance of securing the relevant individual.

Basic salary will be provided at such a level as required to attract the most appropriate candidate and may be set initially at a below
mid-market level on the basis that it may progress towards the mid-market level once expertise and performance has been proven and
sustained. The annual bonus potential will be limited to 125% of basic salary for the Group Chief Executive Offi cer and 100% of basic
salary for other Executive Directors and for all Executive Directors, grants under the LTIP will be limited to 125% of basic salary or 200%
of basic salary in exceptional circumstances. Depending on the timing of the appointment, the Remuneration Committee may deem
it appropriate to set diff erent annual bonus performance metrics to the existing Executive Directors for the fi rst performance year of

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Directors’ Remuneration Report

appointment. Further, in exceptional circumstances the Remuneration Committee may offer additional cash and/or share-based elements
to replace deferred or incentive pay forfeited by an individual leaving a previous employer. It would seek to ensure, where possible, that
these awards would be consistent with any awards forfeited in terms of vesting periods, expected value and performance conditions.

For an internal candidate being appointed as an Executive Director, any variable pay element awarded in respect of the prior role may
be allowed to pay out according to its terms. In addition, any other ongoing remuneration obligations existing prior to appointment may
continue, provided that they are put to Shareholders for approval at the earliest opportunity.

For external and internal candidate appointments, the Remuneration Committee may agree that LSL will meet certain relocation and/or
incidental expenses as appropriate.

In exceptional circumstances the Remuneration Committee may also agree, on the recruitment of a new Executive Director, a notice
period in excess of nine months but with the intention to reduce this to nine months over a specified period.

Service contracts for Executive Directors
The service contracts for each of the Executive Directors in place at the date of this Report are not fixed term and are terminable by either
LSL or the Executive Director on the following bases:

Director

Commencement of current service contract

Notice period

Ian Crabb
Group Chief Executive Officer

Adam Castleton
Group Chief Financial Officer

9th September 2013

2nd November 2015

Helen Buck
Executive Director – Estate Agency

2nd February 2017

Nine months

At the Remuneration Committee’s recommendation and at the Board’s discretion, early termination of an Executive Director’s service
contract can be undertaken by way of payment of basic salary and benefits in lieu of the required notice period. A summary of the main
contractual terms surrounding termination are set out below:

Provision

Notice period

Detailed terms

Nine months

Termination payment

Payment in lieu of notice based on basic salary, fixed benefits and pension.

Remuneration entitlements

A bonus may be payable (pro-rated where relevant) and outstanding Share awards may vest
(see below).

Change of control

No Executive Director’s service contract contains additional provisions in respect of change of
control.

At the Remuneration Committee’s recommendation and at the Board’s discretion, early termination of a service contract can be
undertaken by way of payment of nine months’ basic salary and benefits.

The Remuneration Committee may pay reasonable outplacement and legal fees where appropriate, and may pay any statutory entitlements
or settle or compromise claims in connection with a termination of employment, where considered in the best interests of LSL.

Subject to the performance conditions being met, an annual bonus may be payable with respect to the period of the financial year served,
although it will be pro-rated for time and paid at the normal payment date.

Any share-based entitlements granted to an Executive Director under LSL’s Share plans will be determined based on the relevant plan
rules. However, in certain prescribed circumstances under the LTIP rules, such as death, injury, disability, redundancy, retirement or
cessation by reason of the employing company/business ceasing to be a member of the Group, or other circumstances at the discretion
of the Remuneration Committee, a “good leaver” status may be applied.

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In exceptional circumstances for good leavers, all or part of unvested LTIP awards may vest at the date of cessation of employment. In
all other circumstances the awards for good leavers will vest at the original specified vesting date, unless specifically determined by the
Remuneration Committee that the award(s) for an individual will lapse. Awards to Executive Directors, who are not good leavers, lapse
immediately on cessation. In exercising its discretion to the extent to which and when, an award shall vest the Remuneration Committee
will, under the LTIP rules, take into account:

1. the progress made towards meeting the performance conditions;

2. the extent to which it considers the performance condition would have been satisfied by the end of the vesting period;

3. the proportion of the vesting period elapsed; and

4. any other factors which it considers to be relevant.

Subject to Board approval and any conditions stipulated by the Board, Executive Directors may accept appropriate outside commercial
non-executive director appointments provided that the aggregate commitment is compatible with their duties as an Executive Director.

Non Executive Directors
LSL’s policy is to appoint Non Executive Directors with a breadth of skills and experience relevant to LSL’s businesses. Appointments are
made by the Board upon the recommendations and advice of the Nominations Committee.

Non Executive Directors, including the Chairman, have letters of appointment which set out their duties and responsibilities. The Non
Executive Directors, including the Chairman are not eligible to participate in incentive arrangements or receive pension provision. The
following table shows details of the terms of appointment for the Non Executive Directors in place at the date of this Report:

Director

Date original term commenced

Date current term commenced

Expected expiry date of current term

Kumsal Bayazit Besson
Non Executive Director

1st September 2015

1st January 2015

–

31st August 2018

31st December 2017

Simon Embley
Chairman

Bill Shannon
Deputy Chairman and Senior
Independent Director

David Stewart
Non Executive Director

7th January 2014

7th January 2017

6th January 2020

1st May 2015

–

30th April 2018

Annual report on remuneration
Implementation of the Policy for the year ending 31st December 2017 (unaudited information)
This section of the Directors’ Remuneration Report sets out how the Policy will be implemented for the year ending 31st December 2017.

Basic salary
Executive Directors’ basic salaries are reviewed annually by the Remuneration Committee, taking into account the responsibilities,
skills and experience of each individual, as well as the pay and employment conditions within LSL and basic salary levels within listed
companies of a similar size.

Basic salary levels as at 1st January 2017 and for 2016 for the current Executive Directors are set out below:

Director

Notes

Role

Ian Crabb

Group Chief Executive Officer

Adam Castleton

Group Chief Financial Officer

2017
(£)

406,000

294,000

Adrian Gill

Helen Buck

Executive Director – Estate Agency

285,000

Executive Director – Estate Agency

300,000

% increase

1.5%

1.4%

2016
(£)

400,000

290,000

285,000

2017 basic salary increases for Directors are in line with those of non-commission earning employees.

Notes to summary of fees for the Executive Directors:
1. Adrian Gill stepped down from the Board on 4th January 2017.
2. Helen Buck was appointed Executive Director – Estate Agency on 2nd February 2017 and her basic salary is in line with

the 2014 Policy and proposed 2017 Policy.

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Directors’ Remuneration Report

Annual bonus payments 2017
The Remuneration Committee will operate an annual bonus plan for Executive Directors during 2017 that is broadly similar to that
operated in 2016. The maximum bonus continues to be capped at 100% of basic salary. There will be a sliding scale of performance
targets based on LSL’s budgeted Group Underlying Operating Profit (after the payment of bonuses) for 80% of the potential bonus with
the remaining 20% of the potential bonus based on challenging non-financial performance measures.

The Remuneration Committee has determined that LSL will not disclose the non-financial measures or targets in advance, as they contain
items that are considered to be commercially sensitive. However, 2017 targets will be summarised in the Annual Report and Accounts
2017, which will be published in 2018. The Remuneration Committee is satisfied that the non-financial targets are challenging and
demanding, reflect LSL’s ongoing business expectations and have a clear link to LSL’s strategy. The Group Underlying Operating Profit
targets require LSL’s performance to be significantly better than budget for full pay-out.

Disclosure of annual bonus non-financial measures
Further to the disclosure commitment included in the Annual Report and Accounts 2015, detailed below is a summary of the non-financial
measures which were in place for Ian Crabb and Adrian Gill in relation to their 2015 annual bonus, which were not previously disclosed
due to their commercial sensitivity. For details of the 2016 targets, see page 69.

Ian Crabb, Group Chief Executive Officer was targeted against the following three specific measures accounting for 20% of the total
bonus (and 20% of basic salary):

a. Design, development and delivery of a revised Group-wide strategy;

b. A range of risk management and corporate governance initiatives to deliver good customer outcomes; and

c. A range of management initiatives including the development of Executive Directors and senior management.

The Remuneration Committee undertook an independent assessment of Ian Crabb’s performance against each of these objectives and
concluded that two of the three objectives (a. and b.) were achieved in full. As such 66.6% of this element of the bonus was achieved
resulting in a payment of 13.65% of basic salary, which was disclosed in the Annual Report on Remuneration included in the Annual
Report and Accounts 2015.

Adrian Gill was targeted against the following four specific measures accounting for 20% of the total bonus (and 20% of basic salary):

a. The delivery of an effective acquisition strategy for LSLi acquisitions to deliver value enhancing acquisitions in 2015;
b. The delivery of a specific number and value of letting book acquisitions in 2015;
c. A range of risk management and corporate governance initiatives to deliver good customer outcomes; and
d. Specific targets in relation to leadership development.

The Remuneration Committee undertook an independent assessment against each of these objectives and concluded that two of the
four objectives (b. and c.) were achieved in full. As such 50% of this element of the bonus was achieved resulting in a payment of 10% of
basic salary, which was disclosed in the Annual Report on Remuneration included in the Annual Report and Accounts 2015.

Long-term incentive plan (LTIP)
The current 2016 LTIP scheme received Shareholder approval at the 2016 AGM. Awards to be granted in 2017 to the Executive Directors
will be made over Shares with a value at the date of grant of 100% of basic salary. Awards will be subject to Adjusted Basic Earnings Per
Share growth targets (70% of an award) and a relative TSR condition (30% of an award), and measured over a period of three financial
years commencing 1st January 2017 as follows:

1. 25% of the EPS part of the award will vest for threshold Adjusted Basic EPS growth increasing pro-rata to full vesting for stretch

Adjusted Basic EPS growth. The precise targets will be disclosed in full at the same time as announcing the grants of the awards.

2. 25% of the TSR part of the award will vest if LSL’s TSR is equal to the TSR of the median company increasing pro-rata to full vesting of
this part of the award for upper quartile performance, as measured against the constituents of the comparator group (as listed below).
For any of the TSR part of the award to vest, the Remuneration Committee must also be satisfied that there has been an improvement
in LSL’s underlying financial performance.

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TSR comparator group
As part of LSL’s review of its Policy, the Remuneration Committee agreed a new comparator group for the relative TSR part of LTIP
awards to be made in 2017 and subsequent years. The peer group comprises the following 23 companies that are operating in similar or
related sectors:

• Barratt Developments plc,
• Bellway plc,
• Belvoir Lettings plc,
• Bovis Homes Group plc,
• Countryside Properties plc,
• Countrywide plc,
• Crest Nicholson Holdings plc,
• Foxtons Group plc,
• Grainger plc,
• Howden Joinery Group plc,
• Hunters Property plc,
• M Winkworth plc,

• MartinCo plc,
• Mccarthy And Stone plc,
• Mortgage Advice Bureau plc,
• Paragon Group Of Companies plc,
• Purplebricks Group plc,
• Redrow plc,
• Rightmove plc,
• Shawbrook Group plc,
• St Modwen Properties plc,
• Travis Perkins plc,
• Zoopla Property Group plc.

Benefits
Taxable benefits for the Executive Directors will continue to include a car allowance, life assurance and private medical insurance. Benefits
in kind are not pensionable and are not taken into account when determining basic salary for performance-related remuneration.

Pension
Ian Crabb will continue to receive a 5% of basic salary matching pension contribution. The other Executive Directors do not make pension
contributions and no matching element is therefore made.

Non Executive Directors
The remuneration of the Non Executive Directors is a matter for the Chairman and Executive Directors whilst the remuneration of the
Chairman is a matter for the Remuneration Committee. Fees for both Non Executive Directors and the Chairman are reviewed from time
to time with regard to time commitment required and the level of fees paid by comparable companies.

A summary of fees for the current Non Executive Directors is as follows:

Director

Notes

Kumsal Bayazit Besson
Non Executive Director

Simon Embley
Chairman

Bill Shannon
Deputy Chairman and Senior
Independent Director

David Stewart
Non Executive Director

2017 (£)

40,000

130,000

70,000

45,000

2016 (£)

40,000

130,000

70,000

45,000

Helen Buck ceased to be a Non Executive Director on 2nd February 2017 and received a fee of £40,000 for her role as Non-Executive
Director during 2016.

Notes to summary of fees for the Non Executive Directors:

1. Bill Shannon’s fee is paid for his role as a Non Executive Director and his additional responsibilities as Deputy Chairman, Senior

Independent Director and Chairman of the Nominations Committee and the Remuneration Committee.

2. David Stewart’s fee is paid for his role as a Non Executive Director and his additional responsibility as Chairman of the Audit Committee

which was effective from 28th April 2016. Accordingly, his fee increased from £40,000 to £45,000 is with effect from 28th April 2016.

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Directors’ Remuneration Report

Payments for loss of office
Adrian Gill stepped down from the Board on 4th January 2017. Adrian’s remuneration on the cessation of his employment is set out
below:

a. Basic salary, benefits and pension was paid to the date of cessation of employment on 4th January 2017.

b. No annual bonus will be paid for the financial year 2016 or the four days of financial year 2017 to the date of cessation.

c. All unvested long-term incentive awards lapsed on the date of cessation. There are no vested unexercised long-term incentive awards.

Audited information

Directors’ remuneration
The remuneration of the Directors for 2016 was as follows:

Notes

Basic salary
or fees
£

Pension
Benefits6 contributions7
£

Annual Gain on Share
awards9,10
bonus8
£
£

Other11
£

Total
£

Chairman
Simon Embley

Executive Directors
Adam Castleton

Ian Crabb

Adrian Gill

Non Executive Directors
Kumsal Bayazit Besson 2

Helen Buck

Mark Morris

Bill Shannon

David Stewart

Total

2016
2015

2016
2015
2016
2015
2016
2015

2016
2015
2016
2015
2016
2015
2016
2015
2016
2015

2016
2015

130,000
130,000

290,000
48,333
400,000
365,000
285,000
280,000

40,000
13,333
87,500
40,000
15,667
47,000
70,000
70,000
43,365
26,667

-
-

-
95,574

-
-

130,000
255,574

16,676
2,784
15,000
15,000
16,676
16,663

-
-
20,000
18,250
-
-

40,600
-
64,000
345,333
-
126,000

-
-
-
109,286
-
-

-
100,000
-
-
-
-

347,276
151,117
499,000
852,869
301,676
422,663

-
-
-
-
-
-
-
-
-
-

40,000
13,333
87,500
40,000
15,667
47,000
70,000
70,000
43,365
26,667

1,361,532
1,020,333

48,352
34,447

20,000
18,250

104,600
471,333

-
204,860

- 1,534,484
100,000 1,849,223

Notes to Directors’ remuneration table:
1. Adam Castleton was appointed to the Board as Group Chief Financial Officer on 2nd November 2015.

2. Kumsal Bayazit Besson was appointed to the Board on 1st September 2015.

3. Helen Buck’s 2016 remuneration includes £47,500 paid in respect of consultancy services to the Estate Agency Division. Helen Buck

ceased to be a Non Executive Director on 2nd February 2017.

4. Mark Morris retired from the Board on 28th April 2016.

5. David Stewart was appointed to the Board on 1st May 2015.

6. Benefits refers to benefits in kind, which excludes pension provision, and is comprised of private medical cover and company car or car

allowance.

7. Only the pension for Ian Crabb comprises a Company matching contribution of 5% of basic salary.

8. LSL’s performance in 2016 results in the Executive Directors earning an annual bonus of between 14% and 16% of their basic salary in
relation to the non-financial performance element of the scheme. LSL’s performance in 2015 resulted in the Executive Directors at the
time, earning an annual bonus of between 35% and 80% of their basic salary for the financial and non-financial performance element of
the scheme. See page 68 for further details of the 2015 and 2016 bonus payments.

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9. As disclosed in the Annual Report on Remuneration included in the Annual Report and Accounts 2015, the gain on Share award

values for 2015 presented in the table were based on the 2013 LTIP award, which vested during 2016 based on performance for the
three years ended 31st December 2015. These figures now reflect the actual Share price at vesting (300 pence for Simon Embley’s
award which vested on 4th April 2016 and 222 pence for Ian Crabb’s award which vested on 23rd September 2016).

10. The EPS performance condition for the 2014 LTIP has not been met and the TSR condition is not expected to be met and therefore no
payments will be due. Should there be any vesting of the TSR element (to be tested on 9th April 2017) the figures will be restated in the
2017 Director’s Remuneration Report to reflect this and the actual Share price at vesting as appropriate.

11. Adam Castleton was not entitled to an annual bonus for 2015 under the LSL Executive Director bonus arrangements, given that he
only served 2 months of the 2015 financial year. However, as part of his recruitment arrangements, LSL agreed to compensate him
for the annual bonus forgone in respect of leaving his previous employer during 2015. The compensation, which is consistent with the
2014 Policy, amounted to £100,000 and was paid on the normal LSL annual bonus payment date.

Annual bonus

Annual bonus payments 2016 – audited
Set out in the table below is a summary of the Executive Directors’ bonus scheme for 2016:

Bonus element

Targets for 2016

Performance against targets for 2016

Bonus achieved for 2016

Group Underlying
Operating Profit up to
80% of basic salary for Ian
Crabb and Adam Castleton,
and 20% for Adrian Gill

Stepped scale from threshold
of £42.9m (12.5%) of this part
is payable increasing to £47.8m
(100%).

No bonus in respect of this element
(based on Group Underlying
Operating Profit of £34.6m) was
awarded any of the Executive
Directors.

Estate Agency Underlying
Operating Profit, up to 60%
of basic salary (Adrian Gill
only)

Stepped scale from threshold
of £27.2m (12.5%) of this part is
payable increasing to £35.2m
(100%).

No bonus in respect of this element
(based on Estate Agency Underlying
Operating Profit of £19.4m) was
awarded to Adrian Gill.

Ian Crabb received a total
bonus of 16% of basic
salary.

Adam Castleton received a
total bonus of 14% of basic
salary.

Adrian Gill did not receive
a bonus.

Non-financial measures up
to 20% of basic salary

Four targets aligned to the longer
term strategic goals of the Group.

A bonus of 80% of this element (16%
of basic salary) was awarded to Ian
Crabb, and 0% (14% of basic salary)
was awarded to Adam Castleton
with regard to these measures. No
bonus was awarded to Adrian Gill.

Detailed below is a summary of the non-financial measures which were in place for Ian Crabb and Adam Castleton for their 2016 annual bonus.

Ian Crabb, Group Chief Executive Officer was targeted against the following four specific measures accounting for 20% of the total bonus
(and 20% of basic salary):

a. Delivery of Group-wide strategy;
b. Delivery of organic growth of the Estate Agency business and the design and development of Estate Agency strategy;
c. Delivery of business specific key lender contract renewals; and
d. A range of management initiatives including the development of Executive Directors and senior management.

The Remuneration Committee undertook an independent assessment of Ian Crabb’s performance against each of these objectives and
concluded that two of the four objectives (c and d) were achieved in full and two in part (a and b). As such 80% of this element of the
bonus was achieved resulting in a payment of 16% of basic salary.

Adam Castleton was targeted against the following three specific measures accounting for 20% of the total bonus (and 20% of basic
salary):

a. Completion of LSL’s banking refinancing process;
b. Design, development and delivery of a Group-wide IT strategy; and
c. A range of management initiatives including the development of the Group Finance team.

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Directors’ Remuneration Report

The Remuneration Committee undertook an independent assessment against each of these objectives and concluded that one of the
three objectives (a) was achieved in full and two were achieved in part (b. and c.). As such 70% of this element of the bonus was achieved
resulting in a payment of 14% of basic salary.

The Remuneration Committee is satisfied that these non-financial measures were challenging and demanding, reflective of LSL’s
ongoing business expectations and have a clear link to LSL’s strategy. The financial performance element of the scheme requires LSL’s
performance to be significantly better than budget for full pay-out.

2014 LTIP awards (nil cost options)

Director

Date of grant Basis of

Award (%
of basic
salary)

Number
of Shares
under award

Face value
of awards at
grant date1

Vesting at
threshold

Vesting at
maximum

Performance period

Expected
vesting % in
20152

100%

81,395

£349,998

10th April
2014

Ian Crabb
Group
Chief
Executive
Officer

25%
(EPS)

35%
(TSR)

100%

TSR: three years
from grant date

Nil

EPS: three years
to 31st December
2016

Expected
gain on
Share
awards

Nil

Notes to 2014 LTIP awards:
1 Based on the number of Shares granted multiplied by the three day average Share price immediately prior to the grant date (430 pence).

2 Based on EPS performance for the three-year performance to 31st December 2016, 0% of this element (representing 70% of the award)

will vest on 10th April 2017. TSR performance will be tested over the three year period to 9th April 2017; based on TSR performance to 31st
December 2016, it is expected that 0% of this element (representing 30% of the award) will vest on 10th April 2017.

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Share awards granted during 2016
2016 LTIP awards (nil cost options)

Details of LTIP awards granted in 2016 are as follows:

Executive
Director

Date of grant

Basis of award
(% of salary)

Number of
Shares under
award

Face value at
grant date1

Vesting at
threshold

Vesting at
maximum

Performance
period

31st March 2016 100%

140,105

£400,000

31st March 2016 100%

99,824

£284,998

31st March 2016 100%

101,576

£289,999

25% (EPS)

35% (TSR)

100%

TSR: three
years to 31st
December 2018

EPS: three
years to 31st
December 2018

Ian Crabb
Group Chief
Executive
Officer

Adrian Gill
Executive
Director
– Estate
Agency 2

Adam
Castleton
Group Chief
Financial
Officer

Notes to 2016 LTIP awards:
1 Based on the number of Shares granted multiplied by the three day average Share price immediately prior to the grant date (285.5 pence

for grants made on 31st March 2016).

2 Adrian Gill’s awards lapsed on the date of his cessation of employment (4th January 2017).

For awards presented above:
1 For 70% of awards: 25% of this part of an award will vest for Adjusted Basic EPS growth of 7.5% p.a. increasing pro-rata to 100% of this
part of an award vesting for Adjusted Basic EPS growth of 17.5% p.a. for the three years ending 31st December 2018. There is no vesting
for Adjusted Basic EPS growth less than 7.5% p.a.

2 For 30% of awards: 35% of this part of an award will vest for a median TSR for the three years ending 31st December 2018, increasing
to 100% vesting of this part of an award for an upper quartile TSR, measured against the FTSE 250 (excluding investment trusts). For
the TSR part of an award to vest, the Remuneration Committee must also be satisfied that there has been an improvement in LSL’s
underlying financial performance.

External appointments
During 2016, other than Adrian Gill’s appointment as a non executive director of Lifetime Legal Limited, none of the Executive Directors
held any other non executive directorships of any other companies other than to represent the majority or minority interests of the Group
or to participate in representative trade bodies.

Payments to past Directors

David Newnes:
David Newnes retired from the Board on 31st December 2014. As part of his leaving arrangements David Newnes retained his unvested
2013 and 2014 long-term incentive awards which were pro-rated to reflect the period of service to his date of retirement and remained
subject to the original performance conditions and vesting dates.

a. The 2013 LTIP award vested in 2016 and on exercise of the pro-rated award in September 2016, David Newnes received 21,651 Shares.

b. The EPS performance conditions for the 2014 LTIP award have not been met and the TSR conditions, as noted above, are unlikely to be

met. It is not therefore expected that the pro-rated 2014 LTIP award will vest.

Except as disclosed above, there are no outstanding incentive awards or payments due to David Newnes.

Steve Cooke:
Steve Cooke stepped down from the Board on 19th December 2014. No payments for loss of office were made at that time. In September
2016, in full and final settlement of claims he subsequently brought for payment of his contractual notice period and incentive payments,
LSL made a compensation payment of £350,000 (which included a £130,000 contribution to legal fees).

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Directors’ Remuneration Report

Outstanding Share awards
Options granted to Executive and Non Executive Directors to acquire Ordinary Shares in LSL are as follows:

Director

Award
type

Date of grant

LTIP

23rd September 2013

- 24,456

- (49,228)

Share
price
on grant
479.00p

2016
73,684

Nil

Exercise As at 1st Awards Awards
January granted

price

lapsed exercised

Awards Awards As at 31st
vested December
2016

Exercise
period

Ian Crabb
Group Chief
Executive
Officer

Simon
Embley
Chairman

Adam
Castleton
Group Chief
Financial
Officer

Adrian Gill
Executive
Director
– Estate
Agency

LTIP

10th April 2014

430.00p

Nil

81,395

SAYE

1st June 2014

414.00p 416.00p

4,326

LTIP

16th April 2015

364.00p

Nil 101,648

LTIP

31st March 2016

285.50p

Nil

- 140,105

JSOP

1st June 2010

271.00p 280.00p

83,929

CSOP

11th June 2010

240.00p 240.00p

12,500

LTIP

2nd April 2012

275.00p

Nil

58,333

LTIP

2nd April 2013

337.00p

Nil

47,685

- 15,827

31,858

LTIP

1st December 2015

306.00p

Nil

94,771

LTIP

31st March 2016

285.50p

Nil

- 101,576

LTIP

16th April 2015

364.00p

Nil

76,923

LTIP

31st March 2016

285.50p

Nil

- 99,824

49,228* 23rd September 2016 to
23rd September 2023
10th April 2017 to
10th April 2024

81,395

4,326

- 101,648

140,105

- (83,928)

83,928*

- (12,500)

12,500*

- (58,333) 58,333*

1st June 2017 to
1st December 2017

16th April 2018 to
16th April 2025

31st March 2019 to
31st March 2026

1st June 2013 to
1st June 2020

11th June 2013 to
11th June 2020
2nd April 2015 to
2nd April 2022

2nd April 2016 to
2nd April 2023

- 101,576

94,771 1st December 2018 to
1st December 2025
31st March 2019 to
31st March 2026
16th April 2018 to
16th April 2025
31st March 2019 to
31st March 2026

99,824

76,923

* These awards have vested and are currently within the exercise period

Notes to outstanding Share awards:

1. All of the above are scheme interests. Details of long-term incentive awards granted in 2016 are presented in a separate paragraph

while details of previous outstanding awards are presented in the previous year’s Directors’ Remuneration Report and are included in
Note 13 to the Financial Statements.

2. The Ordinary Share mid-market price ranged from 180 pence to 319.75 pence and averaged 248 pence during 2016. The Share price

on 31st December 2016 was 230.5 pence compared to 284 pence on 1st January 2016.

3. Simon Embley’s Shares awards have been pro-rated to reflect his change of role to Chairman on 1st January 2015 and his ‘good leaver’

status under the scheme rules as at the 31st December 2014.

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Directors’ interests in Shares
The interests of the Directors who served on the Board during the year are set out in the table below:

Shareholdings

Share awards

Director

31st December 2016

31st December 2015

Unvested

Total

Executive Director
shareholding guideline1

31st December 2016

(% of basic salary)

Kumsal Bayazit Besson
Non Executive Director
Helen Buck2
Executive Director – Estate Agency
Adam Castleton3
Group Chief Financial Officer
Ian Crabb4
Group Chief Executive Officer
Simon Embley
Chairman
Adrian Gill5
Executive Director – Estate Agency
Bill Shannon
Deputy Chairman and
Senior Independent Director
David Stewart
Non Executive Director

458

1,878

196,347

Vested but
unexercised
-

458

1,089

327,474

49,228

51,106

6,101,367

6,069,509

154,761

6,256,128

925

179

176,747

22,234

21,274

925

22,234

N/A

0.4

29.4

N/A

0.7

N/A

Notes on Directors’ interest in Shares:

1. Under the current Policy, Executive Directors are required to build and maintain a shareholding equivalent to one year’s basic salary
over a period of three years from the date the guidelines were adopted (or from date of appointment if later) through the retention of
vested Share awards or through open market purchases (shareholding guidelines). The shareholding is calculated based on Shares
owned at 31st December 2016, Share price at 31st December 2016 of 230.5 pence per Share and the Executive Director’s basic salary
at 31st December 2016. The proposed Policy, to be presented for Shareholder approval at the 2017 AGM, increases the shareholding
requirement to 150% of basic salary over a period of five years. The Remuneration Committee will monitor Executive Director
shareholdings during 2017.

2. Helen Buck was appointed as Executive Director – Estate Agency on 2nd February 2017.

3. Adam Castleton was appointed to the Board on 2nd November 2015 and he has purchased Shares as a participant in LSL’s SIP/BAYE

since 1st June 2016. The Shares specified in the table were purchased by the Trust at the prevailing market value.

4. Ian Crabb was appointed to the Board on 9th September 2013 and he has purchased Shares as a participant in LSL’s SIP/BAYE. The

Shares specified in the table were purchased by the Trust at the prevailing market value.

5. Adrian Gill was appointed to the Board on 24th September 2014 and he has purchased Shares as a participant in LSL’s SIP/BAYE. The

Shares specified in the table were purchased by the Trust at the prevailing market value.

All of the interests detailed above are beneficial. Apart from the interests disclosed above no Directors held interests at any time in the year
in the share capital of any other LSL company.

There have been no changes in the interests of any Director between 1st January 2017 and the date of this Report other than the
purchases of Shares by Ian Crabb (211 Shares) and Adam Castleton (211 Shares) as participants of LSL’s SIP/BAYE scheme. These
Shares were purchased by the Trust at the prevailing market rate.

No Director has or has had any interest, direct or indirect, in any transaction, contract or arrangement (excluding service agreements),
which is or was unusual in its nature or conditions or significant to the business of the Group during the current or immediately preceding
financial year.

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Directors’ Remuneration Report

Unaudited information

Performance graph and table
The following graph shows the value, up to the 31st December 2016, of £100 invested in LSL compared with the value of £100 invested in
both the FTSE Small Cap (excluding investment trusts) Index and the FTSE 250 (excluding investment trusts) Index on 31st December 2008.
The FTSE 250 Index has been chosen for consistency with prior years and the FTSE Small Cap Index because LSL is a constituent of the
FTSE Small Cap Index. During the period LSL has outperformed both indices.

For 2017 TSR monitoring see TSR comparitor graph below.

Total Shareholder return

Source: Datastream (Thomson Reuters)

Value [£]

900

800

700

600

500

400

300

200

100

Dec 08

Dec 09

Dec 10

Dec 11

Dec 12

Dec 13

Dec 14

Dec 15

Dec 16

LSL Property Services

FTSE 250 Index [excluding investment trusts]

FTSE Small Cap Index [excluding investment trusts]

This graph shows the value, by 31st December 2016, of £100 invested in LSL Property Services on 31st December 2008, compared with
the value of £100 invested in the FTSE 250 and FTSE Small Cap Indices (excluding investment trusts) on the same date.

The other points plotted are the values at intervening fi nancial year-ends.

LSL AR 2016_Sect1-3 B&C.indd 74

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Group Chief Executive Officer’s total remuneration
The total remuneration figures for the role of Group Chief Executive Officer during each of the last eight financial years are shown in the
table below. The total remuneration figure includes the annual bonus based on that year’s performance and Share awards based on
three year performance periods ending in/just after the relevant year. The annual bonus payout and Share vesting level as a percentage
of the maximum opportunity are also shown for each of these years.

Simon Embley (to 9th September 2013)

Ian Crabb (from 9th September 2013)

2009

2010

2011

2012

2013

2014

2015

2016

£373,754

£517,716

£308,747

£525,018

£500,8621

£119,522

£571,500

£852,869

£499,00

Year Ending in

Total
remuneration

Annual bonus 100%

LTIP vesting

N/A

97.5%

N/A

9.6%

N/A

60%

55%

91.7%

N/A

54%

N/A

93.3%

66.81%

16%

Notes to Group Chief Executive Officer’s total remuneration:
1 The total remuneration disclosed for the year ended 31st December 2013 is Simon Embley’s total remuneration although he ceased being
Group Chief Executive Officer and became Deputy Chairman on 9th September 2013, prior to becoming Non Executive Chairman on the
1st January 2015.

Percentage change in Group Chief Executive Officer’s remuneration
The table below shows the percentage change in the Group Chief Executive Officer’s salary, benefits and annual bonus between the
financial year ending 31st December 2015 and 2016, compared to that of the total remuneration for all employees of the Group for each of
these elements of pay.

Basic salary change

Benefits change

Bonus change

Group Chief Executive Officer

+8.1%2

All employees1

+2.0%

Average number of employees1

155

Nil

-81.5%

-53.7%

Notes on percentage change in Group Chief Executive Officer’s remuneration:

1 Refers to a subset of employees outside the Estate Agency commission structure.

2 Ian Crabb’s basic salary was increased on 1st January 2016 by 8.1% for 2016 as disclosed in the Annual Report and Accounts 2015 and

on 1st January 2017 by 1.5% for 2017, in line with other non-commission earning employees within the Group.

Relative importance of spend on pay
The following table shows LSL’s actual spend on pay (for all employees) relative to dividends paid and profit earned:

2016 (£m)

2015 (£m)

Change (%)

Staff costs1

Dividends (excluding any special
dividend)

Profit after tax

Adjusted profit after tax2

179.3

10.6

50.5

26.6

171.2

12.9

30.5

32.3

+4.7

-18.1

+65.6

-17.6

1 See Note 13 of the Financial Statements for calculation of staff costs.

2 See Note 11 to the Financial Statements.

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Directors’ Remuneration Report

Statement of Shareholder voting
The Directors’ Remuneration Report for the financial year ending 31st December 2015 was presented to Shareholders at the 2016 AGM
which was held on 28th April 2016. The voting outcomes were as follows:

Annual Statement and
Annual Report on Remuneration

Votes cast in favour

Votes cast against

Total votes cast

Abstentions

82,458,028

259,237

82,717,265

99.69%

0.31%

100%

Remuneration Committee

Role and membership
Details of the Remuneration Committee’s composition and responsibilities are set out in the Corporate Governance Report at page 40 of
this Report. During 2016 the Remuneration Committee was chaired by Bill Shannon and its other members were Kumsal Bayazit Besson,
Helen Buck, David Stewart and Mark Morris (until his term of office ended on 28th April 2016). The terms of reference of the Remuneration
Committee are available from the Company Secretary or LSL’s website (www.lslps.co.uk).

Committee’s advisers
The Remuneration Committee took independent advice from NBS on matters relating to senior management and Executive Director
remuneration. No other services are provided to LSL by the Aon group (of which NBS is a part). NBS provided advice to the Remuneration
Committee in relation to the disclosures required in this Report, the creation of the new Policy, the assessment of TSR performance for the
LTIP and benchmarking of the Executive Director roles. Their fees, charged on a time spent basis for 2016 were £33,470 (ex VAT). NBS is
a signatory to the Remuneration Consultants’ Code of Conduct and has confirmed to the Remuneration Committee that it adheres in all
respects to the terms of the Code. The Remuneration Committee considers its advice to be independent and objective.

The Directors’ Remuneration Report is approved by and signed on behalf of the Board of Directors

Bill Shannon
Chairman of the Remuneration Committee
7th March 2017

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Financial Statements

In this section
78

Independent Auditor’s Report to the
Members of LSL Property Services plc

87 Group Income Statement
88 Group Statement of Comprehensive Income
89 Group Balance Sheet
90 Group Statement of Cash-Flows
92 Group Statement of Changes in Equity
93 Notes to the Group Financial Statements
139 Statement of Directors’ Responsibilities in
Relation to the Parent Company Financial
Statements

140 Parent Company Balance Sheet
141 Parent Company Statement of Cash Flow
142 Parent Company Statement of Changes

in Equity

143 Notes to the Parent Company Financial

Statements

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Intercounty’s website, launched January 2016

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Independent Auditor's Report

for the year ended 31st December 2016

INDEPENDENT AUDITOR’S REPORT TO THE MEMBERS OF LSL PROPERTY SERVICES PLC

Our opinion on the Financial Statements
In our opinion:

• LSL Property Services plc’s Group Financial Statements and Parent Company Financial Statements (the “Financial Statements”) give a

true and fair view of the state of the Group’s and of the Parent Company’s affairs as at 31st December 2016 and of the Group’s profit for
the year then ended;

• the Group Financial Statements have been properly prepared in accordance with IFRSs as adopted by the EU;

• the Parent Company Financial Statements have been properly prepared in accordance with IFRSs as adopted by the EU as applied in

accordance with the provisions of the Companies Act 2006; and

• the Financial Statements have been prepared in accordance with the requirements of the Companies Act 2006, and, as regards the

Group Financial Statements, Article 4 of the IAS Regulation.

What we have audited
LSL Property Services plc’s Financial Statements comprise:

Group

Parent Company

Consolidated Balance Sheet as at 31st December 2016

Balance Sheet as at 31st December 2016

Consolidated Income Statement for the year then ended

Statement of Changes in Equity for the year then ended

Consolidated Statement of Comprehensive Income for the year
then ended

Cash-flow statement for the year then ended

Consolidated cash-flow statement for the year then ended

Related Notes 1 to 16 to the Financial Statements

Consolidated Statement of Changes in Equity for the year then
ended

Related Notes 1 to 34 to the Financial Statements

The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting
Standards (IFRSs) as adopted by the EU and, as regards the Parent Company Financial Statements, as applied in accordance with the
provisions of the Companies Act 2006.

Overview of our audit approach

Risks of material
misstatement

• Revenue recognition (including lapse provision)

• Recognition and measurement of professional indemnity (“PI”) liabilities for inaccurate surveys

• Accounting for acquisitions

• Client monies

Audit scope

• We performed an audit of the complete financial information of nine components and audit procedures

on specific balances for a further four components out of a total of 17 components.

• The components where we performed full or specific audit procedures accounted for 100% of profit

before tax, 99% of Revenue.

Materiality

• Overall Group materiality of £1.53m which represents 5% of adjusted profit before tax.

7878

Our assessment of risk of material misstatement
We identified the risks of material misstatement described below as those that had the greatest effect on our overall audit strategy, the
allocation of resources in the audit and the direction of the efforts of the audit team. In addressing these risks, we have performed the
procedures below which were designed in the context of the Financial Statements as a whole and, consequently, we do not express any
opinion on these individual areas.

Key observations communicated to
the Audit Committee
Based on our audit procedures we
concluded that revenue is appropriately
recognised in accordance with IAS 18, and
that there was no evidence of management
override.

The lapsed commission rates used to
calculate the lapse provision are based on
historical trend analysis, and sit within an
acceptable range.

Risk
Revenue recognition (including lapse
provision)

Refer to the Audit Committee Report
(page 46); Accounting policies (page 93);
and Note 3 of the Consolidated Financial
Statements (page 102)

The Group has reported revenues of
£307.8m (2015: £300.6m). We focused
primarily on the timing of revenue
recognised, as given the number of
products and services offered there are
inherent complexities surrounding the
timing of revenue recognition.

In addition the Group earns commissions
acting as an agent for the sale of financial
services policies. If these policies are
subsequently cancelled by the customer
then an element of the commission earned
has to be repaid. The Group is required
to make an estimate based on historical
experience of the amount of commission
earned that it expects to be repaid as a
result of the lapse of policies that have
been sold, which is recognised as a
reduction in revenue.

We identified two specific risks of fraud
(either through management override
or error) in respect of improper revenue
recognition:

• Inappropriate cut off of revenue focusing
around the year-end timing of revenue
recognised both through error or
management bias.

• Inaccurate estimate of lapse rates which
could lead to revenue being manipulated
by understating the provision.

Our response to the risk
We performed full and specific scope
audit procedures over this risk area in
nine locations, which covered 91% of the
revenue balance and 100% of the lapsed
commission provision.

• We understood the key processes used

to record revenue transactions;

• At certain locations we identified and

tested key revenue controls;

• We performed analytical procedures
including data analytics and overall
analytical review;

• We examined material journal entries that
were posted to revenue accounts around
the year-end; and

• We performed detailed cut off testing of
revenue transactions either side of the
Balance Sheet date.

For the estimate of repayable commissions
we performed the following:

• We obtained management’s workings

and checked the underlying calculations
for arithmetical accuracy;

• We tested the integrity of the underlying

data used in management’s assumptions
by selecting a sample of policies that had
lapsed and vouching them to claims from
the lender and bank statements; and

• We identified that each item in our

sample had been correctly included in
the historical lapse rate calculation.

7979

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsKey observations communicated to
the Audit Committee

Based on our procedures we believe
that the estimate for PI liabilities is in
accordance with IAS 37 and the estimate
is within an acceptable range.

We concluded that the exceptional
provision release of £1.6m was
appropriate.

We concluded that the disclosures were
compliant with IAS 37 and IAS 1.

Independent Auditor's Report continued.
for the year ended 31st December 2016

Risk

Our response to the risk

Recognition and measurement of
professional indemnity (“PI”) liabilities
for inaccurate valuations or surveys.

Refer to the Audit Committee Report
(page 46); Accounting policies (page 93);
and Note 23 of the Consolidated Financial
Statements (page 123).

The Group has recognised a professional
indemnity provision of £20.7m (2015:
£29.7m) as at 31st December 2016.

This is an area of significant judgement
and estimation. In particular the Group
has historically experienced a high level of
claims relating to the 2004 to 2008 period,
and valuations work undertaken during this
period continues to result in claims being
made against the Group.

In the current year, a release of the
provision has generated a £1.6m gain
recognised in the Income Statement as an
exceptional item.

There is a risk that the provision for these
claims is significantly different as a result
of variations from key assumptions, in
particular the incidence of claims, the
propensity for claims to result in financial
loss and the resultant loss per claim.

We performed the following procedures
across three full scope locations providing
100% coverage across the professional
indemnity provision. Our procedures have
focused on management’s estimation
process, including whether bias exists in
determining the professional indemnity
provision.

• We recalculated and validated

management’s calculations, with
reference to source documentation;

• We compared these calculations to
expectations and investigated and
corroborated any material variances;

• We corroborated material assumptions
in relation to the incidence of claims, the
propensity for claims to result in financial
loss and the resultant loss per claim used
by management and verified that these
were appropriate;

• We interrogated the data around

the current level of claims to assess
management’s assumptions relating to
how the level of claims will change over
time;

• We traced a sample of payments to
bank statements and reviewed the
post year-end settlements against
management’s estimates in order to
assess management’s accuracy in
estimating claim costs;

• We inquired with legal counsel for certain
claims and investigations to understand
the most current legal standing; and

• We reviewed the disclosures in respect
of the nature and movements of the
provision included within the Financial
Statements for completeness and
appropriateness in line with IAS 37. In
addition, we reviewed the disclosure
required by IAS 1 of the sensitivity of
the carrying amount of the provision to
changes in key estimates.

8080

Key observations communicated to
the Audit Committee

Based on our audit procedures we
conclude that the accounting for
acquisitions has been performed correctly
in line with IFRS 3, and that intangible
assets acquired have been appropriately
identified.

Furthermore, we conclude that financial
liabilities held in relation to earn-out
arrangements have been appropriately
valued.

Risk

Our response to the risk

We have performed the following
procedures across all material acquisitions
within the Group.

• We obtained and read all material sales

and purchase agreements (SPA);

• We verified the appropriateness of the

allocation of the purchase price and the
recognition of intangible assets;

• We identified within the SPA any earn-out

and contingent consideration clauses
and considered whether these had
been appropriately classified as either
consideration or remuneration;

• For acquisitions that arose in prior
periods we tested the subsequent
measurement of contingent consideration
liabilities with reference to SPA, actual
and forecast financial results; and

• Reviewed necessary disclosures in

the Financial Statements including the
(provisional) allocation of fair values.

Accounting for acquisitions

Refer to the Audit Committee Report
(page 46); Accounting policies (page 93);
and Note 28 of the Consolidated Financial
Statements (page 125)

The Group is acquisitive in nature, and
acquisitions frequently include earn-
out arrangements in respect of key
management.

There is a risk that the accounting for
acquisitions, including the allocation of
the purchase price, the recognition of
intangible assets and goodwill and the
treatment of contingent consideration and
earn-out arrangements is not performed in
accordance with IFRS 3.

During the year the Group acquired a 65%
stake in Group First Ltd, alongside put
and call options which provide the option
to purchase the remaining 35% for a
contingent sum.

The total consideration, being both cash
and deferred / contingent consideration
amounts to £15.7m.

A number of other businesses were also
acquired for combined consideration of
£4.2m.

As at the 31st December 2016, the
Group has recognised a financial liability
of £10.1m in relation to contingent
consideration (2015: £9.9m).

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Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsIndependent Auditor's Report continued.
for the year ended 31st December 2016

Risk

Client Monies

Refer to the Audit Committee Report
(page 46); Accounting policies (page 93);
and Note 29 of the Consolidated Financial
Statements (page 128).

As at 31st December 2016 the Group holds
£100.6m (2015: £93.8m) on behalf of
Estate Agency customers. These amounts
do not belong to the Group and are held
on behalf of clients, so as such are held
off balance sheet. There is a risk of loss or
misappropriation of monies held which, if
it arose, would result in a financial cost to
the Group.

Our response to the risk

Key observations communicated to
the Audit Committee

We performed procedures across five full
scope locations and one specific scope
location providing 100% coverage across
the client money balance.

Based on the procedures we have
performed we conclude that client monies
are appropriately held off balance sheet
and reconcile to third party confirmations.

We performed the following procedures:

• We obtained client account

reconciliations and agreed material
reconciling items to supporting evidence;

• We agreed the amounts held in client

monies accounts to the bank letters; and

• We performed a cashbook review of the
trading accounts, with a particular focus
on the appropriateness and cut off of
transfers to and from client accounts.

The scope of our audit

Tailoring the scope
Our assessment of audit risk, our evaluation of materiality and our allocation of performance materiality determine our audit scope for each
entity within the Group. Taken together, this enables us to form an opinion on the consolidated Financial Statements. We take into account
size, risk profile, the organisation of the Group and effectiveness of Group-wide controls, changes in the business environment and other
factors such as recent Internal Audit results when assessing the level of work to be performed at each entity.

In assessing the risk of material misstatement to the Group Financial Statements, and to ensure we had adequate quantitative coverage
of significant accounts in the Financial Statements, of the 17 reporting components of the Group, we selected 13 components covering
entities which represent the principal business units within the Group.

Of the 13 components selected, we performed an audit of the complete financial information of nine components (“full scope components”)
which were selected based on their size or risk characteristics. For the remaining four components (“specific scope components”), we
performed audit procedures on specific accounts within that component that we considered had the potential for the greatest impact on
the significant accounts in the Financial Statements either because of the size of these accounts or their risk profile.

The reporting components where we performed audit procedures accounted for 100% (2015: 95%) of the Group’s profit before tax and
99% (2015: 98%) of the Group’s revenue. For the current year, the full scope components contributed 93% (2015: 85%) of the Group’s
profit before tax and 91% (2015: 91%) of the Group’s revenue. The specific scope components contributed 7% (2015: 10%) of the
Group’s profit before tax and 8% (2015: 7%) of the Group’s revenue. The audit scope of these components may not have included testing
of all significant accounts of the component but will have contributed to the coverage of significant accounts tested for the Group. The
Group audit risk in relation to revenue recognition was subject to audit procedures across nine full scope locations. The Group audit risk in
relation to professional indemnity liabilities was subject to specific procedures at three full scope locations. The Group audit risk in relation
to acquisition accounting was subject to audit procedures at four full scope locations. The Group audit risk in relation to client monies was
subject to audit procedures across five full scope locations and one specific scope location.

Of the remaining four components that together represent 0% of the Group’s profit before tax none are individually greater than 1% of the
Group’s profit before tax. For these components, we performed analytical review procedures to respond to any potential risks of material
misstatement to the Group Financial Statements.

8282

The charts below illustrate the coverage obtained from the work performed by our audit teams.

Profit before tax

Revenue

85% Full scope
components

10% Specific
scope
components

5% Other
procedures

91% Full scope
components

7% Specific
scope
components

2% Other
procedures

Changes from the prior year
The above scope is consistent with the prior year except for the inclusion of three components as full scope this year in comparison to
being specific scope in the prior year. These changes in our scope are as a result of our evaluation of the relative size and risk assessment
of each location.

Involvement with component teams
All audit work performed for the purposes of the audit was undertaken by the Group audit team. All locations are audited by EY and all
reside within the United Kingdom.

Our application of materiality
We apply the concept of materiality in planning and performing the audit, in evaluating the effect of identified misstatements on the audit
and in forming our audit opinion.

Materiality
The magnitude of an omission or misstatement that, individually or in the aggregate, could reasonably be expected to influence the
economic decisions of the users of the Financial Statements. Materiality provides a basis for determining the nature and extent of our audit
procedures.

We determined materiality for the Group to be £1.53m (2015: £1.7m), which is 5% (2015: 5%) of an adjusted profit before tax measure. We
believe that profit before tax excluding the non-underlying profit from the disposal of available for sale financial assets, provides us with the
most relevant measure of Group profitability. In the prior year we did not use an adjusted measure as there were no non-underlying items
that we believed required adjustment.

•Reported profit before tax: £63.5m

Starting basis

•Non-recurring items
•Decrease basis for sale of assets held for sale: £32.9m

Adjustments

•Take 5% of the adjusted profit before tax: £30.6m
•Materiality of £1.53m

Materiality

Performance materiality
The application of materiality at the individual account or balance level. It is set at an amount to reduce to an appropriately low level the
probability that the aggregate of uncorrected and undetected misstatements exceeds materiality.

On the basis of our risk assessments, together with our assessment of the Group’s overall control environment, our judgement was
that performance materiality was 50% (2015: 50%) of our planning materiality, namely £0.8m (2015: £0.9m). We have set performance
materiality at this percentage to ensure that total uncorrected and undetected audit differences in all accounts did not exceed our materiality
level of £1.6m.

8383

Independent Auditor's Report continued.
for the year ended 31st December 2016

Audit work at component locations for the purpose of obtaining audit coverage over significant financial statement accounts is undertaken
based on a percentage of total performance materiality. The performance materiality set for each component is based on the relative scale
and risk of the component to the Group as a whole and our assessment of the risk of misstatement at that component. In the current year,
the range of performance materiality allocated to components was £0.4m to £0.2m (2015: £0.5m to £0.2m).

Reporting threshold
An amount below which identified misstatements are considered as being clearly trivial.

We agreed with the Audit Committee that we would report to them all uncorrected audit differences in excess of £0.08m (2015: £0.09m),
which is set at 5% of planning materiality, as well as differences below that threshold that, in our view, warranted reporting on qualitative
grounds.

We evaluate any uncorrected misstatements against both the quantitative measures of materiality discussed above and in light of other
relevant qualitative considerations in forming our opinion.

Scope of the audit of the Financial Statements
An audit involves obtaining evidence about the amounts and disclosures in the Financial Statements sufficient to give reasonable assurance
that the Financial Statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:
whether the accounting policies are appropriate to the Group’s and the Parent Company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall
presentation of the Financial Statements. In addition, we read all the financial and non-financial information in the Annual Report and
Accounts to identify material inconsistencies with the audited Financial Statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we
become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Respective responsibilities of Directors and auditor
As explained more fully in the Directors’ Responsibilities Statement set out on page 35, the Directors are responsible for the preparation
of the Financial Statements and for being satisfied that they give a true and fair view. Our responsibility is to audit and express an opinion
on the Financial Statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006.
Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in
an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone
other than the Company and the Company’s members as a body, for our audit work, for this report, or for the opinions we have formed.

Opinion on other matters prescribed by the Companies Act 2006
In our opinion:

• the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies Act 2006;

and

• based on the work undertaken in the course of the audit:

• the information given in the Strategic Report and the Directors’ Report for the financial year for which the Financial Statements are

prepared is consistent with the Financial Statements; and

• the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements.

• based on the work undertaken in the course of the audit, the information given in the Corporate Governance Report set out on page 40,

with respect to internal control and risk management systems in relation to financial reporting processes and about share capital
structures and in compliance with rules 7.2.5 and 7.2.6 of the Disclosure Guidance and Transparency Rules sourcebook made by the
Financial Conduct Authority:

• is consistent with the Financial Statements; and

• has been prepared in accordance with applicable legal requirement.

• based on the work undertaken rules 7.2.2, 7.2.3 and 7.2.7 in the Disclosure Guidance and Transparency Rules sourcebook made by
the Financial Conduct Authority (with respect to the Company’s corporate governance code and practices about its administrative,
management and supervisory bodies and their committees) have been complied with if applicable.

8484

Matters on which we are required to report by exception

ISAs (UK and Ireland)
reporting

We are required to report to you if, in our opinion, financial and non-financial information
in the Annual Report is:

• materially inconsistent with the information in the audited Financial Statements; or

• apparently materially incorrect based on, or materially inconsistent with, our
knowledge of the Group acquired in the course of performing our audit; or

• otherwise misleading.

In particular, we are required to report whether we have identified any inconsistencies
between our knowledge acquired in the course of performing the audit and the
Directors’ statement that they consider the Annual Report and Accounts taken as a
whole is fair, balanced and understandable and provides the information necessary
for Shareholders to assess the entity’s performance, business model and strategy;
and whether the Annual Report appropriately addresses those matters that we
communicated to the Audit Committee that we consider should have been disclosed.

We have no
exceptions to
report.

Companies Act 2006
reporting

In light of the knowledge and understanding of the Company and its environment
obtained in the course of the audit, we have identified no material misstatements in the
Strategic Report, Report of the Directors or Corporate Governance Report set out on
pages 11, 36 and 40.

We have no
exceptions to
report.

• We are required to report to you if, in our opinion:

• adequate accounting records have not been kept by the Parent Company, or returns
adequate for our audit have not been received from branches not visited by us; or

• the Parent Company Financial Statements and the part of the Directors’

Remuneration Report to be audited are not in agreement with the accounting records
and returns; or

• certain disclosures of Directors’ remuneration specified by law are not made; or

• we have not received all the information and explanations we require for our audit.

• a Corporate Governance Report has not been prepared by the Company

Listing rules review
requirements

We are required to review:

• the Directors’ statement in relation to going concern, set out on page 38, and longer-

term viability, set out on page 37; and

• the part of the Corporate Governance Report relating to the Company’s compliance
with the provisions of the UK Corporate Governance Code specified for our review.

We have no
exceptions to
report.

8585

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsIndependent Auditor’s Report continued.
for the year ended 31st December 2016

Statement on the Directors’ assessment of the principal risks that would threaten the solvency or liquidity of the entity

We have nothing
material to add or
to draw attention
to.

ISAs (UK and Ireland)
reporting

We are required to give a statement as to whether we have anything material to add or
to draw attention to in relation to:

• the Directors’ confirmation in the Annual Report and Accounts that they have carried
out a robust assessment of the principal risks facing the entity, including those that
would threaten its business model, future performance, solvency or liquidity;

• the disclosures in the Annual Report and Accounts that describe those risks and

explain how they are being managed or mitigated;

• the Directors’ statement in the Financial Statements about whether they considered

it appropriate to adopt the going concern basis of accounting in preparing them, and
their identification of any material uncertainties to the entity’s ability to continue to do
so over a period of at least twelve months from the date of approval of the Financial
Statements; and

• the Directors’ explanation in the Annual Report and Accounts as to how they have
assessed the prospects of the entity, over what period they have done so and why
they consider that period to be appropriate, and their statement as to whether they
have a reasonable expectation that the entity will be able to continue in operation and
meet its liabilities as they fall due over the period of their assessment, including any
related disclosures drawing attention to any necessary qualifications or assumptions.

Alistair Denton (Senior Statutory Auditor)
for and on behalf of Ernst & Young LLP, Statutory Auditor
Leeds

7th March 2017

Notes:

1. The maintenance and integrity of the LSL Property Services plc website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters

and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the Financial Statements since they were initially presented on the website.

2. Legislation in the United Kingdom governing the preparation and dissemination of Financial Statements may differ from legislation in other jurisdiction.

8686

Group Income Statement

for the year ended 31st December 2016

Revenue
Operating expenses:
Employee and subcontractor costs
Establishment costs
Depreciation on property, plant and equipment
Other

Other operating income
(Loss) on sale of property, plant and equipment

Income from joint ventures

Group Underlying Operating Profit

Share-based payments
Amortisation of intangible assets
Exceptional gains
Exceptional cost
Contingent consideration
Group operating profit

Finance income
Finance costs
Net financial costs

Profit before tax
Taxation
– related to exceptional items and contingent consideration
– others

Profit for the year
Attributable to
– Owners of the parent
– Non-controlling interest

Note

13
15
8
8
8
4

6
7

2016
£’000

2015
£’000

307,750

300,594

(182,687)
(19,888)
(5,475)
(67,282)
(275,332)

(171,216)
(19,012)
(5,296)
(65,180)
(260,704)

1,165
(9)

1,865
(44)

1,049

1,156

34,623

42,867

(1,263)
(3,914)
34,531
(2,341)
3,785
65,421

–
(1,896)
(1,896)

(871)
(1,803)
–
(258)
1,477
41,412

5
(2,817)
(2,812)

63,525

38,600

(6,432)
(6,601)
(13,033)

52
(8,190)
(8,138)

50,492

30,462

50,493
(1)

30,414
48

Earnings per Share expressed in pence per Share:
Basic
Diluted

11
11

49.2
49.0

29.7
29.5

8787

Group Statement of Comprehensive Income

for the year ended 31st December 2016

Profit for the year
Items to be reclassified to profit and loss in subsequent periods:
Reclassification adjustments for disposal of financial assets
Income tax effect
Revaluation of financial assets
Income tax effect
Net other comprehensive (loss)/income to be reclassified to profit and loss in
subsequent periods:

Note

17
14
17
14

2016
£’000

50,492

(33,022)
5,914
11,816
(2,015)

2015
£’000

30,462

(440)
53
5,130
(580)

(17,307)

4,163

Total other comprehensive (loss)/income for the year, net of tax

(17,307)

4,163

Total comprehensive income for the year, net of tax
Attributable to
– Owners of the parent
– Non-controlling interest

33,185

34,625

33,186
(1)

34,577
48

8888

Group Balance Sheet

as at 31st December 2016

Non-current assets
Goodwill
Other intangible assets
Property, plant and equipment
Financial assets
Investments in joint ventures
Total non-current assets

Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets

Total assets

Current liabilities
Financial liabilities
Trade and other payables
Current tax liabilities
Provisions for liabilities
Total current liabilities

Non-current liabilities
Financial liabilities
Deferred tax liability
Provisions for liabilities
Total non-current liabilities
Total Liabilities

Net assets

Equity
Share capital
Share premium account
Share-based payment reserve
Treasury shares
Fair value reserve
Retained earnings
Equity attributable to owners of parent
Non-controlling interests
Total equity

The Financial Statements were approved by and signed on behalf of the Board by:

Ian Crabb
Group Chief Executive Officer
7th March 2017

Adam Castleton
Group Chief Financial Officer
7th March 2017

Note

15
15
16
17
18

19
20

22
21

22
14
23

25
26
26
26
26

Company No. 05114014

2016
£’000

2015
£’000

151,901
33,249
18,842
4,603
8,762
217,357

32,263
–
32,263

249,620

(10,739)
(50,900)
(7,581)
(5,742)
(74,962)

136,395
30,517
19,393
28,871
8,778
223,954

35,366
5,603
40,969

264,923

(15,777)
(50,102)
(2,525)
(12,100)
(80,504)

(26,469)
(3,801)
(15,622)
(45,892)
(120,854)

(52,511)
(6,927)
(17,625)
(77,063)
(157,567)

128,766

107,356

208
5,629
4,303
(5,368)
3,571
120,239
128,582
184
128,766

208
5,629
3,564
(5,988)
20,878
82,880
107,171
185
107,356

8989

Group Statement of Cash-Flows

for the year ended 31st December 2016

Cash generated from operating activities
Profit before tax
Adjustments to reconcile profit before tax to net cash
from operating activities

Exceptional operating items and contingent
consideration

Amortisation of intangible assets
Finance income
Finance costs
Share-based payments
Total adjustments
Group operating profit before amortisation and share-
based payments
Depreciation
Dividend income
Share of results of joint ventures

Loss/(gain) on sale of property, plant and equipment
and financial assets

Decrease in trade and other receivables
(Decrease) in trade and other payables
(Decrease) in provisions

Cash generated from operations

Interest paid

Tax paid

Net cash generated from operating activities

31st December 2016

31st December 2015

Note

£’000

63,525

38,600

8
15
6
7
13

(35,975)
3,914
–
1,896
1,263

5,475
(492)
(1,049)

3,265
(614)
(8,561)

(1,948)
(8,861)

(1,219)
1,803
(5)
2,817
871

5,296
(835)
(1,156)

(253)

975
(1,026)
(9,345)

(1,852)
(5,613)

4,267

42,867

3,052

(9,396)
36,523

(7,465)
29,058

(28,902)

34,623

3,943

(5,910)
32,656

(10,809)
21,847

9090

Group Statement of Cash-Flows continued.
for the year ended 31st December 2016

31st December 2016

31st December 2015

Note

£’000

Cash-flows from investing activities
Cash acquired on purchase of subsidiary undertaking
Acquisitions of subsidiaries and other businesses
Payment of contingent consideration

Investment in financial assets
Investment in joint venture

Cash received on sale of financial assets
Dividends received from joint venture
Dividends received from financial assets

Interest received
Purchase of property, plant and equipment and
intangible assets
Proceeds from sale of property, plant and equipment

Net cash generated/(expended) on investing
activities

Cash-flows from financing activities
Repayment of loans
Drawdown of loans
Repayment of overdraft
Repayment of loan notes
Payment of deferred consideration
Proceeds from exercise of share options
Dividends paid
Net cash used in financing activities

Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the
year
Cash and cash equivalents at the end of the year

28
28

17
18

15,16
16

1,593
(8,451)
(3,537)
–
(2)
35,991
–
778
–

(6,064)
69

(25,243)
–
–
(7,294)
(2,422)
48
(12,916)

774
(13,202)
(4,015)
(1,178)
–
297
1,499
549
5

(7,991)
328

20,377

(22,934)

–
11,500
(718)
(63)
–
1,314
(12,554)

(47,827)

(5,603)

5,603
–

(521)

5,603

–
5,603

9191

Group Statement of Changes in Equity

for the year ended 31st December 2016

Year Ended 31st December 2016

Share capital
£’000

At 1st January 2016
Disposal of financial assets
(net of tax)
Revaluation of financial assets
(net of tax)
Other comprehensive
income for the year
Profit for the year
Total comprehensive
income for the year
Exercise of options
Share-based payments
Dividend payment
At 31st December 2016

208

–

–
–

–
–
–
–
208

Share
premium
account
£’000

5,629

Share-based
payment
reserve
£’000

Treasury
shares
£’000

Fair value
reserve
£’000

Retained
earnings
£’000

Total equity
£’000

Non-
controlling
interests
£’000

Total
£’000

3,564

(5,988)

20,878

82,880

107,171

185

107,356

–

–
–

–

–
–

–

–
–

(27,108)

9,801

–

(27,108)

9,801

–

(27,108)

9,801

(17,307)
–

–
50,493

(17,307)
50,493

–
(1)

(17,307)
50,492

–
–
–
–
5,629

–
(524)
1,263
–
4,303

–
620
–
–
(5,368)

(17,307)
–
–
–
3,571

50,493
(218)
–
(12,916)
120,239

33,186
(122)
1,263
(12,916)
128,582

(1)
–
–
–
184

33,185
(122)
1,263
(12,916)
128,766

During the year ended 31st December 2016, the Trust acquired nil Shares. During the period 176,955 share options were exercised relating
to LSL’s various share option schemes resulting in the Shares being sold by the Trust. LSL received £49,000 on exercise of these options.

Year Ended 31st December 2015

Share capital
£’000

At 1st January 2015
Disposal of financial assets
(net of tax)
Revaluation of financial assets
(net of tax)
Other comprehensive
income for the year
Profit for the year
Total comprehensive
income for the year
Exercise of options
Share-based payments
Dividend payment
At 31st December 2015

208

–

–
–

–
–
–
–
208

Share
premium
account
£’000

5,629

Share-based
payment
reserve
£’000

Treasury
shares
£’000

Fair value
reserve
£’000

Retained
earnings
£’000

Total equity
£’000

Non-
controlling
interests
£’000

Total
£’000

3,498

(7,922)

16,715

64,835

82,963

137

83,100

–

–
–

–

–
–

–

–
–

(387)

4,550

4,163
–

–

(387)

4,550

–
30,414

4,163
30,414

–
–
–
–
5,629

–
(805)
871
–
3,564

–
1,934
–
–
(5,988)

4,163
–
–
–
20,878

30,414
185
–
(12,554)
82,880

34,577
1,314
871
(12,554)
107,171

–

–
48

48
–
–
–
185

(387)

4,550

4,163
30,462

34,625
1,314
871
(12,554)
107,356

During the year ended 31st December 2015, the Trust acquired no Shares. During the period 551,446 share options were exercised relating
to LSL’s various share option schemes resulting in the Shares being sold by the Trust. LSL received £1,314,000 on exercise of these
options.

9292

Notes to the Group Financial Statements

for the year ended 31st December 2016

1. Authorisation of Financial Statements and statement of compliance with IFRSs

The Group Financial Statements of LSL and its subsidiaries for the year ended 31st December 2016 were authorised for issue by the Board
of the Directors on 7th March 2017 and the Balance Sheet was signed on the Board’s behalf by Ian Crabb, Group Chief Executive Officer
and Adam Castleton, Group Chief Financial Officer. LSL is a listed company, in London, incorporated and domiciled in England and the
Group operates a network of estate agencies, surveying and valuation and other related businesses.

The Group’s Financial Statements have been prepared in accordance with International Financial Reporting Standards (IFRSs) as adopted
by the EU and as applied in accordance with the provisions of the Companies Act 2006.

2. Accounting policies

Basis of preparation of financial information
The Group Financial Statements have been prepared on a going concern basis and on a historical cost basis, except for available-for-sale
financial assets that have been measured at fair value.

The accounting policies which follow set out those significant policies which apply in preparing the Financial Statements for the year ended
31st December 2016. The Group’s Financial Statements are presented in Sterling and all values are rounded to the nearest thousand
pounds (£’000) except when otherwise indicated.

New standards and interpretations
There are no IFRS amendments or IFRIC interpretations effective for the first time this financial year that had a material impact on the Group.

Judgements and estimates
The preparation of financial information in conformity with IFRS as adopted by EU requires Management to make judgements, estimates
and assumptions that affect the application of policies and reporting amounts of assets and liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates.

The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the
period in which the estimate is revised if the revision affects only that period, or in the period of the revision and future periods if the revision
affects both current and future periods.

Judgements
Areas of judgment that have the most significant effect on the amounts recognised in the consolidated Financial Statements are:

Revenue recognition
Revenue recognition is an area of judgment and a misstatement could be material to the Group although the nature of the revenue
recognised in the Group is not considered complex. The Group sells a number of different products and services and operates in multiple
locations throughout the UK.

Exceptional items
The Group recognises certain items as exceptional where, in the judgment of the Directors, they are required to be disclosed separately due
to them being material in size and unusual in nature. This is reviewed in accordance with IAS 1.

Intangible assets
The recognition of intangible assets, particularly on acquisition, is an area of judgement. On acquisition Management seek to identify any
assets that meet the criteria of an intangible asset, namely that it is separately identifiable, the Group has power over the asset and future
economic benefits will be derived from the asset.

Deferred tax
The Group recognises deferred tax assets on all applicable temporary differences where it is probable that future taxable profits will be
available for utilisation. This requires Management to make judgments and assumptions regarding the amount of deferred tax that can be
recognised based on the magnitude and likelihood of future taxable profits. Deferred tax liabilities are provided for in full.

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsNotes to the Group Financial Statements continued.
for the year ended 31st December 2016

2. Accounting policies (continued)

Estimates
The key assumptions affected by future uncertainty that have a significant risk of causing material adjustment to the carrying value of assets
and liabilities within the next financial year are:

Lapse provision
Certain subsidiaries sell life assurance products which are cancellable without a notice period, and if cancelled within a set period require
that a portion of the commission earned must be repaid. The lapse provision is recognised as a reduction in revenue.

Assessment of the useful life of an intangible asset
The consideration of the relevant factors when determining the useful life of an intangible asset requires judgement. Similarly there is also
judgement applied when assessing that an intangible asset has an indefinite useful life. The value of the intangible asset is measured at cost
and the useful life of the asset is determined by assessing the period over which the Group can benefit from the asset.

Valuation of financial assets
The Group owns minority interests in two unlisted entities. In accordance with the accounting standards, these investments are held at
fair value and significant judgment is required in assessing this. Further details of the methodology used are disclosed in Note 17 to these
Financial Statements. A sensitivity calculation which shows the impact of changes in assumption is shown in Note 30.

Professional indemnity (PI Cost) claims
Significant judgement is required when provisioning for PI claims. Details of key assumptions in these areas are disclosed in Notes 8 and
23 to these Financial Statements. A sensitivity calculation which illustrates the impact of different assumptions on the required PI Costs
provision is included in Note 23.

Valuations in acquisitions
The measurement of intangible assets other than goodwill on a business combination involves the estimation of future cash flows and other
inputs relevant to the valuation model being applied.

Impairment of intangible assets
The Group determines whether indefinite life intangible assets (including goodwill) are impaired on an annual basis and this requires an
estimation of the value in use of the cash generating units to which the intangible assets are allocated. This involves estimation of future
cash-flows and choosing a suitable discount rate (see Note 15).

Contingent consideration
The Group has acquired a number of businesses over the last few years. With regard to a number of these businesses, the Group has
put and call options to purchase the remaining interest in these businesses at some point in the future. In accordance with the accounting
standards, estimates have been made with regard to the future profitability of these acquisitions and a provision for the cost of acquiring
these interests has been recognised. The provisions are disclosed in Note 22 to these Financial Statements. A sensitivity calculation which
shows the impact of changes in assumption is shown in Note 30.

Income tax
The Group will pay income taxes based on the tax computations of the subsidiary entities. While the outcome of these tax computations
cannot be determined with certainty until the completion of subsidiary accounts, Management estimates of income taxes are used to
determine the tax charges and provisions carried by the Group.

Basis of consolidation

Subsidiaries:
Subsidiaries are consolidated from the date of their acquisition, being the date on which the Group obtains control, and continue to be
consolidated until the date such control ceases. Control is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the entity and has the ability to affect those returns through its power over the entity. Specifically, the Group controls an
entity if, and only if, the Group has:

• Power over the entity (i.e. existing rights that give it the current ability to direct the relevant activities of the entity).

• Exposure, or rights, to variable returns from its involvement with the entity.

• The ability to use its power over the entity to affect its returns.

2. Accounting policies (continued)

The Financial Statements of subsidiaries used in the preparation of the consolidated Financial Statements are prepared on the same
reporting year as the Parent Company and are based on consistent accounting policies. All intra-Group balances and transactions,
including unrealised profits arising from them, are eliminated in full.

A change in the ownership interest of a subsidiary, without loss of control, is accounted for as an equity transaction.

Non-controlling interests:
Non-controlling interests represent the equity in a subsidiary not attributable directly or indirectly to the Parent Company; and is presented
within equity in the consolidated Balance Sheet, separately from equity attributable to owners of the parent. Losses within a subsidiary are
attributed to the non-controlling interest even if it results in a deficit balance.

Non GAAP measures / alternative performance measures
In the analysis of the Group’s financial performance, LSL reports a number of Alternative Performance Measures (APMs) that are designed
to assist with the understanding of the underlying performance of the Group. The Group seeks to present a measure of underlying
performance which is not impacted by the inconsistency in profile of exceptional gains and exceptional costs, contingent consideration,
amortisation of intangible assets and share-based payments. These measures are not defined under IFRS and, as a result, do not comply
with Generally Accepted Accounting Practice (known as non-GAAP measures) and may not be directly comparable with other companies’
non-GAAP measures. They are not designed to be a substitute for any of the IFRS measures of performance. The principal APMs used
within the consolidated Financial Statements and the location of the reconciliations to equivalent IFRS measures are:

• Group Underlying Operating Profit (reconciled in Note 5)

• Adjusted basic EPS (reconciled in Note 11)

• Adjusted diluted EPS (reconciled in Note 11)

The Directors consider that these adjusted measures give a better and more consistent indication of the Group’s underlying performance.
These measures form part of Management’s internal financial review and are contained within the monthly management information reports
reviewed by the Board.

Interest in Joint Ventures
The Group’s investments in its joint ventures are accounted for using the equity method. Under the equity method, the investment in a
joint venture is initially recognised at cost. The carrying amount of the investment is adjusted to recognise changes in the Group’s share
of net assets of the joint venture since the acquisition date. Goodwill relating to the joint venture is included in the carrying amount of the
investment and is not tested for impairment individually.

The statement of profit or loss reflects the Group’s share of the results of operations of the joint venture. In addition, when there has been
a change recognised directly in the equity of the joint venture, the Group recognises its share of any changes, when applicable, in the
Statement of Changes in Equity. Unrealised gains and losses resulting from transactions between the Group and the joint venture are
eliminated to the extent of the interest in the joint venture.

The aggregate of the Group’s share of profit or loss of a joint venture is shown on the face of the Statement of Profit or Loss, within Group
operating profit, and represents profit or loss after tax and non-controlling interests in the subsidiaries of the joint venture. The Financial
Statements of the joint ventures are prepared for the same reporting period as the Group. When necessary, adjustments are made to bring
the accounting policies in line with those of the Group.

After application of the equity method, the Group determines whether it is necessary to recognise an impairment loss on its investment in its
joint ventures. At each reporting date, the Group determines whether there is objective evidence that the investment in the joint venture is
impaired. If there is such evidence, the Group calculates the amount of impairment as the difference between the recoverable amount of the
joint venture and its carrying value, and then recognises the loss as ‘share of profit of a joint venture’ in the Statement of Profit or Loss.

Upon loss of significant influence over the joint control over the joint venture, the Group measures and recognises any retained investment
at its fair value. Any difference between the carrying amount of the joint venture upon loss of significant influence or joint control and the fair
value of the retained investment and proceeds from disposal is recognised in profit or loss.

2. Accounting policies (continued)

Intangible assets

Business combinations from 1st January 2010
Business combinations are accounted for using the acquisition method. The cost of an acquisition is measured as the aggregate of the
consideration transferred, measured at acquisition date fair value and the amount of any non-controlling interest in the acquiree. The choice
of measurement of non-controlling interest, either at fair value or at the proportionate share of the acquiree’s identifiable net assets, is
determined on a transaction by transaction basis. Acquisition costs incurred are expensed and included in administrative expenses.

When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and designation
in accordance with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Any contingent
consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date.

Subsequent changes to the fair value of the contingent consideration which is deemed to be an asset or liability will be recognised in
accordance with IAS 39 either in profit or loss or in other comprehensive income. If contingent consideration is linked to a service condition,
then expected payments are recognised as remuneration in the profit or loss over the earn-out period.

Where a put and call option is transacted over a non-controlling interest independently of a business combination, the present value of the
exercise price of the put and call option is recorded as a liability with a debit to equity. Subsequent movements in the assessment of the
exercise price are taken to profit and loss. If the put option lapses, the liability is derecognised with a corresponding adjustment to equity.

Goodwill is initially measured at cost being the excess of the aggregate of the acquisition-date fair value of the consideration transferred
and the amount recognised for the non-controlling interest (and where the business combination is achieved in stages, the acquisition-
date fair value of the acquirer’s previously held equity interest in the acquiree) over the net identifiable amounts of the assets acquired and
the liabilities assumed in exchange for the business combination. Assets acquired and liabilities assumed in transactions separate to the
business combinations, such as the settlement of pre-existing relationships or post-acquisition remuneration arrangements are accounted
for separately from the business combination in accordance with their nature and applicable IFRSs. Identifiable intangible assets, meeting
either the contractual-legal or separability criteria are recognised separately from goodwill.

If the aggregate of the acquisition-date fair value of the consideration transferred and the amount recognised for the non-controlling interest
(and where the business combination is achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in
the acquiree) is lower than the fair value of the assets, liabilities and contingent liabilities and the fair value of any pre-existing interest held in
the business acquired, the difference is recognised in profit and loss.

Other intangible assets
Intangible assets other than goodwill that are acquired separately are measured at cost on initial recognition. Following the initial recognition,
intangible assets are carried at cost less accumulated amortisation and impairment losses. The useful lives of intangible assets are
assessed to be either finite or indefinite.

Gains or losses arising from derecognition of an intangible asset are measured as the difference between the net disposal proceeds and the
carrying amount of the asset and are recognised in the Income Statement when the asset is derecognised.

Amortisation
Amortisation is charged to the Income Statement on a straight line basis over the estimated useful lives of intangible assets (unless such
lives are indefinite) as follows:

Customer contracts:
Residential Sales customer contracts
Surveying and Valuation customer contracts
Lettings contracts
Order book:
Estate Agency pipeline
Surveying pipeline
Estate Agency register
Others:
Franchise agreements
In-house software

– three to ten years
– between three and five years
– five years

– three months
– one week
– twelve months

– ten years
– between three and five years

2. Accounting policies (continued)

Intangible assets with finite lives are amortised over the useful economic life and assessed for impairment whenever there is an indication
that the intangible asset may be impaired. The amortisation period and the amortisation method are reviewed at least at each financial
year-end. Changes in the expected useful life or the expected pattern of consumption of future economic benefits embodied in the asset is
accounted for by changing the amortisation period or method, as appropriate, and are treated as changes in accounting estimates.

Brand names are not amortised as the Directors are of the opinion that they each have an indefinite useful life. This is based on the
expectation of the Directors that there is no foreseeable limit to the period over which each of the assets are expected to generate net
cash inflows to the businesses and the Directors are confident that trademark registration renewals will be filed at the appropriate time and
sufficient investment will be made in terms of marketing and communication to maintain the value inherent in the brands, without incurring
significant cost. All brands recognised have been in existence for a number of years and are not considered to be at risk of obsolescence
from technical, technological nor commercial change. Whilst operating in competitive markets they have demonstrated that they can
continue to operate in the face of such competition and that there is expected to remain an underlying market demand for the services
offered. The lives of these brands are not dependent on the useful lives of other assets of the entity.

Impairment
Intangible assets with indefinite useful lives are not amortised but tested for impairment annually either individually or at the cash generating
unit level. The useful life of such intangible assets is reviewed annually to determine whether indefinite life assessment continues to be
supportable. If not, the change in the useful life assessment from indefinite to finite is made on a prospective basis.

The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists,
or when annual impairment testing for an asset is required, the Group makes an estimate of the asset’s recoverable amount. An asset’s
recoverable amount is the higher of an asset’s or cash generating unit’s fair value less costs to sell and its value in use, and is determined
for an individual asset unless the asset does not generate cash inflows that are largely independent of those from other assets or groups
of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down
to its recoverable amount. In assessing value in use, the estimated future cash-flows are discounted to their present value using a pre-tax
discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses
of continuing operations are recognised in the Income Statement in those expense categories consistent with the function of the impaired
asset.

For assets excluding goodwill, an assessment is made at each reporting date as to whether there is any indication that previously
recognised impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the assets’ or
cash generating unit’s recoverable amount.

Property, plant and equipment
Property, plant and equipment are stated at cost less accumulated depreciation and impairment losses. Depreciation is provided to write off
cost less the estimated residual value of property, plant and equipment by equal annual instalments over their estimated useful economic
lives as follows:

Office equipment, fixtures and fittings
Computer equipment
Motor vehicles
Leasehold improvements
Freehold and long leasehold property

– over three to seven years
– over three to four years
– over three to four years
– over the shorter of the lease term or ten years
– over fifty years or the lease term whichever is shorter

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use
or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the Income Statement when the asset is derecognised. These assets’ residual values, useful
lives and methods of depreciation are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

Dividends
Equity dividends are recognised when they become legally payable. In the case of interim dividends to equity Shareholders, this is when
paid. In the case of final dividends, this is when approved by the Shareholders at the AGM.

2. Accounting policies (continued)

Income taxes
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the taxation authorities, based on
tax rates and laws that are enacted or substantively enacted by the balance sheet date. The Management Team periodically evaluates
positions taken in the tax returns with respect to the situations in which applicable tax regulations are subject to interpretation and
establishes provisions where appropriate.

Deferred income tax is recognised on all temporary differences arising between the tax bases of assets and liabilities and their carrying
amounts in the Financial Statements, with the following exceptions:

• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business

combination that at the time of the transaction affects neither accounting nor taxable profit or loss;

• in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary

differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the

deductible temporary differences, carried forward tax credits or tax losses can be utilised.

Deferred income tax assets and liabilities are measured on an undiscounted basis at the tax rates that are expected to apply when the
related asset is realised or liability is settled, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Unrecognised deferred tax
assets are reassessed at each reporting period and are recognised to the extent that it has become probable that future taxable profits will
allow the deferred tax asset to be recovered.

Deferred income tax assets and liabilities are offset, only if a legally enforceable right exists to set off current tax assets against current
tax liabilities, the deferred income taxes relate to the same taxation authority and that authority permits the Group to make a single net
payment. Income tax is charged or credited directly to other comprehensive income or equity, if it relates to items that are charged or
credited in the current or prior periods to other comprehensive income or equity respectively. Otherwise income tax is recognised in the
Income Statement.

Share-based payment transactions

Equity-settled transactions
The equity share option programmes allow Group employees to acquire LSL Shares. The fair value of the options granted is recognised
as an employee expense with a corresponding increase in equity in the case of equity-settled schemes. The fair value is measured at
grant date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the
options granted is measured using the Black-Scholes model, taking into account the terms and conditions (including market and non-
vesting conditions) upon which the options were granted. Non-market vesting conditions are taken into account by adjusting the number
of equity instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting
period is based on the number of options that eventually vest. No expense is recognised for awards that do not ultimately vest, except for
equity-settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective
of whether or not the market or non-market vested condition is satisfied, provided that all other performance and/or service conditions are
satisfied.

The dilutive effect of outstanding options is reflected as additional share dilution in the computation of diluted earnings per share (further
details given in Note 11).

Treasury shares
The Group has an employee share trust (ESOT) and an employee benefit trust (Trust) for the granting of Shares to Executive Directors and
selected senior employees. Shares held by the ESOT and the Trusts are treated as treasury shares and presented in the Balance Sheet
as a deduction from equity. No gain or loss is recognised in the Income Statement on the purchase, sale, issue or cancellation of the
Group’s own equity instruments. The finance costs and administration costs relating to the ESOT and the Trusts are charged to the Income
Statement. Dividends earned on Shares held in the ESOT and the Trusts have been waived. The Shares are ignored for the purposes of
calculating the Group’s EPS.

2. Accounting policies (continued)

Leases

Group as a lessee
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases and
rentals payable are charged in the Income Statement on a straight line basis over the lease term.

Group as a lessor
Assets leased out under operating leases are included in property, plant and equipment and depreciated over their estimated useful lives.
Rental income, including the effect of lease incentives, is recognised on a straight line basis over the lease term.

Pensions
The Group operates a defined contribution pension scheme for employees of all Group Companies. The assets of the scheme are invested
and managed independently of the finances of the Group. The pension cost charge represents contributions payable in the year.

Provisions
A provision is recognised in the Balance Sheet when the Group has a present legal or constructive obligation as a result of a past event,
and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material, provisions are
determined by discounting the expected future cash-flows at a pre-tax rate that reflects current market assessments of the time value of
money and, when appropriate, the risks specific to the liability.

Financial instruments
Financial assets and financial liabilities are recognised in the Group’s Balance Sheet when the Group becomes a party to the contractual
provisions of the instrument. When financial assets are recognised initially, they are measured at fair value, being the transaction price plus,
in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. Financial assets are derecognised
when the Group no longer has the rights to cash-flows, the risks and rewards of ownership or control of the asset. Financial liabilities are
derecognised when the obligation under the liability is discharged, cancelled or expires. All regular way purchases and sales of financial
assets are recognised on the trade date, being the date that the Group commits to purchase or sell the asset. Regular way transactions
require delivery of assets within the timeframe generally established by regulation or convention in the market place.

The subsequent measurement of financial assets depends on their classification.

The Group’s accounting policy for each category of financial instruments is as follows:

Available-for-sale financial assets
Available-for-sale financial assets are those non-derivative financial assets that are designated as such or are not classified as held to
maturity, loan and receivables or fair value through profit or loss. After initial recognition available-for-sale financial assets are measured at
fair value with gains or losses being recognised in other comprehensive income and as a separate component of equity until the investment
is de-recognised or until the investment is determined to be impaired at which time the cumulative gain or loss previously reported in equity
is included in the Income Statement. Where a reliable indicator of fair value cannot be obtained the assets are valued at cost.

If an available-for-sale financial asset is impaired, an amount comprising the difference between its cost (net of any principal payment and
amortisation) and its fair value is transferred from equity to the Income Statement. Reversals of impairment losses in respect of equity
instruments classified as available-for-sale are not recognised in the Income Statement.

Cash and short-term deposits
Cash and short-term deposits in the Balance Sheet comprise cash at bank and in hand and short-term deposits with an original maturity
period of three months or less.

For the purposes of the Group cash-flow statement, cash and short-term deposits consist of cash and short-term deposits.

Trade receivables
Trade receivables do not carry any interest and are stated at their original invoiced value as reduced by appropriate allowances for
estimated irrecoverable amounts.

Trade receivables generally have four to seven day payment terms in the Estate Agency business and thirty days in the Surveying business.
Provision is made when there is objective evidence that the Group will not be able to recover balances in full. Balances are written off when
the probability of recovery is assessed as being remote.

2. Accounting policies (continued)

In relation to trade receivables carried at amortised cost, a provision for impairment is made when there is objective evidence (such as the
probability of insolvency or significant financial difficulties of the debtor) that the Group will not be able to collect all of the amounts due
under the original terms of the invoice. The carrying amount of the receivable is reduced through use of an allowance account. Impaired
debts are de-recognised when they are assessed as uncollectable.

Trade payables
Trade payables do not carry any interest and are stated at their original invoice value.

Interest bearing loans and borrowings
All loans and borrowings are initially recognised at fair value less directly attributable transaction costs. After initial recognition, interest-
bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses arising
on repurchase, settlement or otherwise cancellation of liabilities are recognised respectively in finance income and finance costs.

Finance costs comprise interest payable on borrowings calculated at the effective interest rate method and recognised on an accruals
basis.

Borrowing costs are recognised as an expense when incurred.

Assets carried at cost
If there is objective evidence of an impairment loss on an unquoted equity instrument that is not carried at fair value because its fair value
cannot be reliably measured, the amount of the loss is measured as the difference between the asset’s carrying amount and the present
value of estimated future cash-flows discounted at the current market rate of return for a similar financial asset.

Revenue recognition
Revenue is recognised to the extent that it is probable that economic benefits will flow to the Group and the revenue can be reliably
measured. Revenue is measured at the fair value of the consideration receivable, net of discounts, rebates, VAT and other sales taxes or
duty. The following criteria must also be met before revenue is recognised:

Rendering of services
Revenue from the exchange fees in the Estate Agency business is recognised by reference to the legal exchange date of the housing
transaction. Revenue from the supply of Surveying services is recognised upon the completion of the professional Valuations or Surveys by
the surveyor. Revenue from Lettings, Asset Management and conveyancing fees is recognised on completion of the service being provided.

Financial Services income
Revenue from mortgage procuration fees is recognised by reference to the completion date of the mortgage on the housing transaction.
Revenue from protection policy sales is recognised by reference to the date that the policy is accepted by the insurer.

Interest income
Revenue is recognised as interest accrues (using the effective interest method - that is the rate that exactly discounts estimated future cash
receipts through the expected life of the financial instrument to the net carrying amount of the financial asset).

Rental income
Rental income including the effect of lease incentives from sub-let properties is recognised on a straight line basis over the lease term.

Dividends
Revenue is recognised when the Group’s right to receive the payment is established.

Exceptional items
The Group presents as exceptional items on the face of the Income Statement those material items of income and expense which, because
of the nature and expected infrequency of the events giving rise to them, merit separate presentation to allow Shareholders to understand
better the elements of financial performance in the year, so as to facilitate comparison with prior periods and to assess better trends in
financial performance.

100

2. Accounting policies (continued)

New standards and interpretations not applied
The following new standards, new interpretations and amendments to standards and interpretations that the Directors consider relevant to
the Group, have been issued but are not effective for the financial year beginning 1st January 2016 and have not been early adopted:

International Accounting Standards
(IAS/IFRSs)

IFRS 2

IFRS 9

IFRS 15

IFRS 16

Share-Based Payment Transaction: Classification and Measurement
This amendment to IFRS 2 is intended to eliminate diversity of classification and
measurement.

Financial Instruments: Classification and Measurement
This final version of IFRS 9 adds a new expected loss impairment model and
amends the classification and measurement model for financial assets by
adding a new fair value through other comprehensive income category for
certain debt instruments.

Revenue from Contracts with Customers
This Standard specifies how, and when, an IFRS reporter will recognise
revenue, as well as requiring such entities to provide users of financial
statements with more informative, relevant disclosures.

Leases
This Standard specifies how an IFRS reporter will recognise, measure, present
and disclose leases. The standard provides a single lessee accounting model,
requiring lessees to recognise assets and liabilities for all leases unless the lease
term is 12 months or less or the underlying asset has a low value.

Effective date

1st January 2018

1st January 2019

Amendment to IAS 7

Statement of Cash-Flows
Disclosure initiative to improve the understanding of an entity’s debt.

1st January 2017

The Directors continue to evaluate the impact of IFRS 16. They do not anticipate that the adoption of any of the other standards and
interpretations above will have a material impact on the Group’s Financial Statements, other than additional disclosures, in the period of
initial application but will continue to review the potential impact and expect to conclude on their findings during 2017.

101

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports
Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

3. Revenue

The revenue and pre-tax income is attributable to the continuing activity of Estate Agency and Related Services and the provision of
Surveying and Valuation Services on residential property. All revenue arises in the United Kingdom.

Revenue is analysed as follows:

Revenue from services
Operating revenue
Rental income
Dividend income
Gain on disposal of financial assets
Other operating income
Finance income
Total revenue

2016
£’000

307,750
307,750
673
492
–
1,165
–
308,915

2015
£’000

300,594
300,594
729
835
301
1,865
5
302,464

Dividend income was received in the year from the Group’s investments in Zoopla and GPEA. Further details of LSL’s investments are
shown in Note 17.

4. Segment analysis of revenue and operating profit

For management purposes, the Group is organised into business units based on their products and services and has two reportable
operating segments as follows:

• The Estate Agency and Related Services segment provides services related to the sale and letting of residential properties. It operates a
network of high street branches. As part of this process, the Estate Agency Division also provides marketing and arranges conveyancing
services. In addition, it provides repossession asset management services to a range of lenders. It also arranges mortgages for a number
of lenders and arranges pure protection and general insurance policies for a panel of insurance companies via the Estate Agency
branches, Pink Homes Loans, First Complete, Embrace Mortgage Services, First2Protect and Linear Financial Services. The Financial
Services revenue included within the Estate Agency Division includes two mortgage and insurance distribution networks providing
products and services for sale via financial intermediaries. A significant proportion of the results of the Financial Services are inextricably
linked to the Estate Agency business. They have therefore been aggregated with those of the Estate Agency and Related Service
segment.

• The Surveying and Valuation Services segment provides a valuations and professional survey service of residential properties to various

lenders and individual customers.

Each segment has various products and services and the revenue from these products and services are disclosed on pages 16 to 19
under the Business Review sections of the Strategic Report.

The Management Team monitors the operating results of its business units separately for the purpose of making decisions about resource
allocation and performance assessment. Segment performance is evaluated based on operating profit or loss which in certain respects,
as explained in the table below, is measured differently from operating profit or loss in the Group Financial Statements. Head office costs,
Group financing (including finance costs and finance incomes) and income taxes are managed on a Group basis and are not allocated to
operating segments.

Operating segments
The following table presents revenue and profit information regarding the Group’s operating segments for the financial year ended
31st December 2016 and financial year ended 31st December 2015 respectively.

102

4. Segment analysis of revenue and operating profit (continued)

Year ended 31st December 2016

Income Statement information
Segmental revenue
Segmental result:
– before exceptional costs, contingent consideration, amortisation and
share-based payments
– after exceptional costs, contingent consideration, amortisation and
share-based payments
Finance income
Finance costs
Profit before tax
Taxation
Profit for the year

Balance Sheet information
Segment assets – intangible
Segment assets – other
Total Segment assets
Total Segment liabilities
Net assets/(liabilities)
Other segment items
Capital expenditure including intangible assets
Depreciation
Amortisation of intangible assets
Share of results of joint venture
Professional indemnity claim (PI Costs)
Onerous leases provision
Share-based payment

Estate Agency
and Related
Services
£’000

Surveying
and Valuation
Services
£’000

Unallocated
£’000

Total
£’000

243,036

64,714

–

307,750

24,500

17,508

(7,385)

34,623

22,344

18,030

25,047

65,421
–
(1,896)
63,525
(13,033)
50,492

Estate Agency
and Related
Services
£’000

Surveying
and Valuation
Services
£’000

Unallocated
£’000

Total
£’000

172,736
56,574
229,310
(53,997)
175,313

(4,927)
(5,077)
(3,914)
1,049
–
(678)
(200)

12,414
6,873
19,287
(32,780)
(13,493)

(1,325)
(398)
–
–
(20,686)
–
(562)

–
1,023
1,023
(34,077)
(33,054)

–
–
–
–
–
–
(501)

185,150
64,470
249,620
(120,854)
128,766

(6,252)
(5,475)
(3,914)
1,049
(20,686)
(678)
(1,263)

Unallocated net liabilities comprise plant and equipment (£8,000), other assets (£1,015,000), accruals (£436,000), financial liabilities
(£5,759,000), deferred and current tax liabilities (£11,382,000), revolving credit facility (£16,500,000).

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Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

4. Segment analysis of revenue and operating profit (continued)

Year ended 31st December 2015

Estate Agency and
Related Services
£’000

Surveying
and Valuation
Services
£’000

Unallocated
£’000

Total
£’000

236,525

64,069

–

300,594

31,288

18,104

(6,525)

42,867

29,347

17,459

(5,394)

41,412
5
(2,817)
38,600
(8,138)
30,462

Estate Agency and
Related Services
£’000

Surveying
and Valuation
Services
£’000

155,670
82,883
238,553
(43,052)
195,501

(7,401)
(4,874)
(1,798)
1,156
–
133
(496)

11,242
8,659
19,901
(42,461)
(22,560)

(590)
(422)
(5)
–
(2,109)
–
(640)

Unallocated
£’000

Total
£’000

–
6,469
6,469
(72,054)
(65,585)

166,912
98,011
264,923
(157,567)
107,356

–
–
–
–
–
–
265

(7,991)
(5,296)
(1,803)
1,156
(2,109)
133
(871)

Unallocated net liabilities comprise plant and equipment (£9,000), other assets (£857,000), cash (£5,603,000), accruals (£1,554,000),
financial liabilities (£15,548,000), deferred and current tax liabilities (£9,452,000), revolving credit facility (£45,500,000).

5. Adjusted performance measures

In addition to the various performance measures defined under IFRS, the Group reports a number of alternative performance measures
that are designed to assist with the understanding of the underlying performance of the Group. The Group seeks to present a measure
of underlying performance which is not impacted by the inconsistency in profile of exceptional gains and exceptional costs, contingent
consideration, amortisation of intangible assets and share-based payments. Share-based payments are excluded from the underlying
performance due to the fluctuations that can impact the charge, such as lapses and the level of annual grants. The three adjusted
measures reported by the Group are:

• Group Underlying Operating Profit

• Adjusted Basic EPS

• Adjusted diluted EPS.

104

5. Adjusted performance measures (continued)

The Directors consider that these adjusted measures shown below give a better and more consistent indication of the Group’s underlying
performance. These measures form part of Management’s internal financial review and are contained within the monthly management
information reports reviewed by the Board.

The calculations of Adjusted Basic and adjusted diluted EPS are given in Note 11 and a reconciliation of Group Underlying Operating Profit
is shown below:

Group operating profit
Share-based payments
Amortisation of intangible assets
Exceptional gains
Exceptional costs
Contingent consideration
Group Underlying Operating Profit

6. Finance income

Interest receivable on funds invested

7. Finance costs

Interest on revolving credit facility and overdraft
Interest on loan notes
Gain from amendment of loan note interest rate
Unwinding of discount on professional indemnity (PI Costs) provision
Unwinding of discount on contingent consideration

8. Exceptional items and contingent consideration

Exceptional costs:
Branch/centre closure and restructuring costs including redundancy costs
Contingent consideration on acquisitions
Exceptional gains:
Gain on disposal of Zoopla Shares
Provision for professional indemnity claims/notifications (PI Costs)

Note

8
8
8

2016
£’000

65,421
1,263
3,914
(34,531)
2,341
(3,785)
34,623

2016
£’000

–

2016
£’000

1,949
60
(799)
200
486
1,896

2016
£’000

2,341
(3,785)

(32,931)
(1,600)
(34,531)

2015
£’000

41,412
871
1,803
–
258
(1,477)
42,867

2015
£’000

1,852
354
–
159
452
2,817

2015
£’000

258
(1,477)

–
–
–

Branch closure and restructuring costs
As announced in the Group’s trading update on 22nd July 2016 the EU referendum has impacted UK consumer confidence. Given the
difficulty of accurately predicting market transactions and consumer confidence for the remainder of the calendar 2016, the Board did
not expect market conditions to improve sufficiently to meet previous financial expectations for the full year and as such, the Group took
appropriate cost measures where necessary to adapt the Group’s cost base. These cost saving programs, along with the technological
refresh in the Surveying business, took place across the Group in the second half and resulted in £2.3m of one off exceptional costs. This
treatment is consistent with prior years where restructuring costs due to branch closures were treated as exceptional.

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Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

8. Exceptional items and contingent consideration (continued)

Contingent consideration
The credit for consideration on the acquisition in 2011 of Marsh & Parsons amounted to £1,964,000 (2015: credit £3,002,000). The
exceptional contingent consideration credit recognised in the year relating to other acquisitions, primarily a credit for LMS of £268,000
and a credit of £1,142,000 in LSLi (2015: charge for LMS of £2,136,000 and a credit of £611,000 in LSLi). See Notes 22 and 28 for more
details.

Gain on disposal of financial assets
Between 20th July 2016 and 31st October 2016, LSL sold its entire holding of 11,313,786 ordinary shares in Zoopla for total proceeds of
£36.1m at an average price per share of £3.19. This resulted in an exceptional gain of £32,931,000.

Provision for professional indemnity (PI) claims/notifications (PI Costs)
In 2016 the Group continued to make positive progress in addressing the historic PI claims and there has been a net £1.6m exceptional
release (see Note 23).

9. Profit before tax

Profit before tax is stated after charging:

Auditor’s remuneration (Note 10)
Operating lease rentals:
Land and buildings
Plant and machinery
Loss on sale of property, plant and equipment and financial assets

10. Auditor’s remuneration

The remuneration of the auditors is further analysed as follows:

Audit of the Financial Statements

Audit of subsidiaries

Audit of the financial statements of the prior period

Total audit

Audit related assurance services (interim results review fee)

Other assurance services

Tax compliance services

Tax advisory services

2016
£’000

450

11,029
4,499
9

2015
£’000

517

10,669
4,806
253

2016
£’000

257

374

–

33
450

2015
£’000

234

132

415

–

5
517

106

11. Earnings per Share (EPS)

Basic EPS amounts are calculated by dividing net profit for the year attributable to ordinary equity holders of the Parent Company by the
weighted average number of Ordinary Shares outstanding during the year.

Diluted EPS amounts are calculated by dividing the net profit attributable to ordinary equity holders of the Parent Company by the weighted
average number of Ordinary Shares outstanding during the year plus the weighted average number of Ordinary Shares that would be
issued on the conversion of all the dilutive potential Ordinary Shares into Ordinary Shares.

Basic EPS
Effect of dilutive Share options
Diluted EPS

Profit after tax
£’000

Weighted average
number of Shares

2016
Per Share amount
Pence

50,493 102,575,484
519,565
50,493 103,095,049

49.2

49.0

Profit after tax
£’000

Weighted average
number of Shares

30,414 102,406,770
791,256
30,414 103,198,026

2015
Per Share amount
Pence

29.7

29.5

There have been no other transactions involving Ordinary Shares or potential Ordinary Shares between the reporting date and the date of
completion of these Financial Statements.

The Directors consider that the adjusted earnings shown below give a better and more consistent indication of the Group’s underlying
performance:

Group operating profit before contingent consideration, exceptional items, share-based payments and
amortisation (excluding non-controlling interest):

Net finance costs (excluding exceptional and contingent consideration items)
Normalised taxation

Adjusted profit after tax1 before exceptional items, share-based payments and amortisation

2016
£’000

2015
£’000

34,625
(1,410)
(6,643)
26,572

42,819
(2,360)
(8,193)
32,266

Adjusted basic and diluted EPS

Adjusted Basic EPS
Effect of dilutive Share options
Adjusted diluted EPS

Adjusted profit
after tax1
£’000

Weighted average
number of Shares

2016
Per Share amount
Pence

Adjusted profit
after tax1
£’000

Weighted average
number of Shares

2015
Per Share amount
Pence

26,572 102,575,484
519,565
26,572 103,095,049

25.9

25.8

32,266 102,406,770
791,256
32,266 103,198,026

31.5

31.3

Note:
1 This represents adjusted profit after tax attributable to equity holders of the Parent. The normalised tax rate in 2016 is 20.00% (2015: 20.25%).

12. Dividends paid and proposed

Declared and paid during the year:
Equity dividends on Ordinary Shares:
2014 Final: 8.3 pence per Share
2015 Interim: 4.0 pence per Share
2015 Final: 8.6 pence per Share
2016 Interim: 4.0 pence per Share

Dividends on Ordinary Shares proposed (not recognised as a liability as at 31st December):
Equity dividends on Ordinary Shares:
Dividend: 6.3 pence per Share (2015: 8.6 pence per Share)

2016
£’000

2015
£’000

8,458
4,096

12,554

8,812
4,104
12,916

6,466

8,808

107

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

13. Directors and employees

Remuneration of Directors

Directors’ remuneration (short-term benefits)1
Contributions to money purchase pension schemes (post-employment benefits)
Share-based payments

2016
£’000

1,514
20
311
1,845

2015
£’000

1,626
18
226
1,870

1 included within this amount is accrued bonuses of £105,000 (2015: £571,000).

The number of Directors who were members of Group money purchase pension schemes during the year totalled 1 (2015: 1). During the
year the Directors exercised nil CSOP options (2015: nil), nil JSOP options (2015: nil), and nil SAYE options (2015: nil).

Employee numbers and costs
The Group employs staff in its branches and head offices. Aggregate payroll costs of these employees were:

Wages and salaries
Social security costs
Pension costs

Total employee costs

Subcontractor costs

Total employee and subcontractor costs2

Share-based payment expense (see below)

2016
£’000

161,692
16,534
2,435

180,661

2,026

182,687

1,263

2015
£’000

150,368
15,891
2,274

168,533

2,683

171,216

871

2 The total employee and subcontractor costs exclude employees redundancy costs of £504,000 (2015: £258,000), which have been shown under exceptional costs (see Note 8).

The monthly FTE staff numbers (including Directors) during the year averaged 4,630 (2015: 4,677).

Estate Agency and Related Services
Surveying and Valuation Services

Share-based payments

2016

3,983
647
4,630

2015

3,935
742
4,677

Long-term Incentive Plan
The Group operates a LTIP (an equity-settled share-based remuneration scheme) for certain employees. Under the LTIP, the options vest if
the individual remains an employee of the Group after a three year period, unless the individual has left under certain ‘good leaver’ terms in
which case the options may vest earlier and providing the performance conditions are met.

LTIP 2015 & 2016 vesting conditions
30% of the options vest based on the TSR of LSL as compared to the FTSE 250 index (excluding investment trusts) over the three year
performance period:

• If the Group is in the top 25% percentile, all of these options will vest;

• If the Group is at the median 35% will vest;

• Straight line vesting between median and top 25% percentile; and

• Below the median no options vest.

108

13. Directors and employees (continued)

70% of the options are based on the adjusted EPS performance over the three financial years starting with the financial year in which the
LTIP award is granted:

• If growth is equal to or over (≥) 17.5% p.a. – 100% vest;

• If growth is 7.5% p.a. – 25% vest;

• Straight line vesting between 7.5% p.a. and 17.5% p.a.; and

• If growth is below 7.5% p.a. no options vest.

LTIP 2014 vesting conditions
30% of the options vest based on the TSR of LSL as compared to the FTSE 250 index (excluding investment trusts) over the three year
performance period:

• If the Group is in the top 25% percentile, all of these options will vest;

• If the Group is at the median 35% will vest;

• Straight line vesting between median and top 25% percentile; and

• Below the median no options vest.

70% of the options are based on the adjusted EPS performance over the three financial years starting with the financial year in which the
LTIP award is granted:

• If growth is ≥ 20% p.a. – 100% vest;

• If growth is 12.5% p.a. – 25% vest;

• Straight line vesting between 12.5% p.a. and 20% p.a.; and

• If growth is below 12.5% p.a. no options vest.

LTIP 2013 vesting conditions
30% of the options vest based on the TSR of LSL as compared to the FTSE 250 index (excluding investment trusts) over the three year
performance period:

• If the Group is in the top 25% percentile, all of these options will vest;

• If the Group is at the median 35% will vest;

• Straight line vesting between median and top 25% percentile; and

• Below the median no options vest.

70% of the options are based on the adjusted EPS performance over the three financial years starting with the financial year in which the
LTIP award is granted:

• If growth is ≥ 10% p.a. – 100% vest;

• If growth is 7% p.a. – 25% vest;

• Straight line vesting between 7% p.a. and 10% p.a.; and

• If growth is below 7% p.a. no options vest.

109

13. Directors and employees (continued)

LTIP 2012 vesting conditions
30% of the options vest based on the TSR of LSL as compared to the FTSE 250 index (excluding investment trusts) over the three year
performance period:

• If the Group is in the top 25% percentile, all of these options will vest;

• If the Group is at the median 35% will vest;

• Straight line vesting between median and top 25% percentile; and

• Below the median no options vest.

70% of the options are based on the adjusted EPS performance over the three financial years starting with the financial year in which the
LTIP award is granted:

• If growth is ≥ 12% p.a. – 100% vest;

• If growth is 8% p.a. – 25% vest;

• Straight line vesting between 8% p.a. and 12% p.a.; and

• If growth is below 8% p.a. no options vest.

Outstanding at 1st January
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at 31st December

2016

2015

Weighted
average
exercise
price
£

–
–
–
–
–

Number

1,178,458
697,279
(159,174)
(147,819)
1,568,744

Weighted
average
exercise
price
£

–
–
–
–
–

Number

1,135,571
493,970
(115,039)
(336,044)
1,178,458

There were 147,021 options exercisable at the end of the year (2015: 64,677). The weighted average remaining contractual life is
1.46 years (2015: 1.36 years). The weighted average fair value of options granted during the year was £2.51 (2015: £3.13). The weighted
average share price of options at the date of their exercise was £2.78 (2015: £3.49).

Joint Share Ownership Plan (JSOP)
Awards under the JSOP participate in increases in the value of Shares in the Company above the share price at the date of grant. Awards
comprise of an interest in jointly owned Shares (i.e. Ordinary Shares held in co-ownership with the Trust) and a stock appreciation right.
A key feature of the JSOP is that individuals are required to purchase their interest in the jointly owned shares and have thereby put their
personal capital at risk.

There were 129,464 options (2015: 129,464) exercisable at the end of the year which relate to the 2010 scheme which vested in 2013.
Given that the scheme has vested, the weighted average remaining contractual life is nil (2015: nil), participants can exercise their options
up until 2020 and have therefore four years (2015: five years) remaining until their option lapses. No options were exercised or lapsed during
the year (2015: nil). The average market value at the date of exercise was £nil (2015: £nil).

110

13. Directors and employees (continued)

Company Stock Option Plan (CSOP)
The Group operates a CSOP (an equity-settled share-based remuneration scheme) for certain employees. Under the CSOP, the options
vest if the individual remains an employee of the Group after a three year period, unless the individual has left under certain ‘good leaver’
terms in which case the options may vest earlier.

Outstanding at 1st January
Granted during the year
Exercised during the year
Lapsed during the year
Outstanding at 31st December

2016

2015

Weighted
average
exercise
price
£

3.85
2.86
2.59
4.07
3.60

Number

1,208,717
336,860
(9,808)
(139,345)
1,396,424

Weighted
average
exercise
price
£

3.72
3.62
2.69
3.91
3.85

Number

1,314,246
243,407
(201,795)
(147,141)
1,208,717

There were 147,287 options exercisable at the end of the year (2015: 164,367). The average market value at the date of exercise was
£2.71 (2015: £3.44).

The weighted average fair value of options granted during the year was £1.49 (2015: £1.97). The weighted average remaining contractual
life is 0.85 years (2015: 1.28 years).

Save-As-You-Earn scheme (SAYE)
The Group has offered options under the SAYE scheme in each of 2011 to 2014 and 2016 years. All these offers were open to all qualifying
employees and provide for an exercise price equal to the daily average market price on the date of grant. The options will vest if the
employee remains in service for the full duration of the option scheme (three years). There are no cash settlement alternatives.

Outstanding at 1st January
Granted during the year
Exercised
Lapsed during the year due to employees withdrawal
Outstanding at 31st December

2016

2015

Weighted
average
exercise
price
£

3.83
2.66
3.03
3.49
3.17

Number

562,341
490,958
(7,973)
(375,630)
669,696

Weighted
average
exercise
price
£

3.56
–
2.62
3.81
3.83

Number

1,017,127
–
(234,612)
(220,174)
562,341

The weighted average fair value of options granted during the year was £2.66 (2015: £nil) and the weighted average remaining contractual
life was 1.04 years (2015: 0.8 years). The average market value at the date of exercise was £3.00 (2015: £3.61).

There were nil (2015: 1,374) options exercisable at the end of the year.

Equity-settled transactions
The assumptions used in the estimation of the fair value of equity-settled options were as follows:

LTIP
2016

SAYE
2016

CSOP 2016

Option pricing model used
Weighted average Share price at grant date (£)
Exercise price (£)
Expected life of options (years)
Expected volatility
Expected dividend yield
Risk free interest rate

Black-Scholes Black-Scholes Black-Scholes
2.86
2.86
3
100%
4.35%
0.84%

2.86
–
3
100%
4.35%
0.84%

2.86
2.66
3
100%
4.35%
0.84%

111

13. Directors and employees (continued)

Option pricing model used
Weighted average share price at grant date (£)
Exercise price (£)
Expected life of options (years)
Expected volatility
Expected dividend yield
Risk free interest rate

The total cost recognised for equity-settled transactions is as follows:

Share-based payment charged during the year

A charge of £501,000 (2015: credit £266,000) relates to employees of the Company.

LTIP
2015

CSOP
2015

Black-Scholes Black-Scholes
3.62
3.62
3
100%
3.3%
1.22%

3.48
–
3
100%
3.3%
1.20%

2016
£’000

1,263

2015
£’000

871

The volatility assumption, measured at the standard deviation of expected share price returns, is based on statistical analysis of historical
share price. The dividend yield assumption is based on the fact that the shares awarded are not eligible to receive dividends until the end of
the vesting period.

14. Taxation

(a) Tax on profit on ordinary activities
The major components of income tax charge in the Group Income Statements are:

UK corporation tax – current year

– adjustment in respect of prior years

Deferred tax:
Origination and reversal of temporary differences
Adjustment in respect of prior year
Total deferred tax (credit)
Total tax charge in the Income Statement

2016
£’000

12,703
1,009
13,712

(500)
(179)
(679)
13,033

2015
£’000

7,787
391
8,178

(470)
430
(40)
8,138

The 2015 summer budget announced that the headline rate of corporation tax in the UK would be further reduced from the current rate of
20% to 19% effective from 1st April 2017, and further reduced to 18%, effective from 1st April 2020. The Budget of March 2016 announced
that from 1st April 2020, the proposed corporation tax will be lowered further still to 17%.

Following the substantive enactment of Finance Bill 2016 in September 2016, the corporation tax rate of 17% has been confirmed.
Accordingly this is the rate at which deferred tax has been provided (2015: 18%). Corporation tax is recognised at the headline UK
effective rate of 20% (2015 : 20.25%).

The effective rate of tax for the year was 20.5% (2015: 21.1%). The effective tax rate for 2016 was decreased as a result of reducing the
rate at which deferred tax is provided resulting from the reduction in the headline rate of corporation tax.

Deferred tax credited directly to other comprehensive income is £3.8m (2015: charge of £0.5m); this is comprised of a credit of £5.9m and
a charge of £2.1m and relates to the disposal and revaluation of financial assets. There is also a credit arising as a result of the impact of
rate change on deferred tax of £0.2m. Income tax credited directly to the share-based payment reserve is £0.1m (2015: £nil).

112

14. Taxation (continued)

(b) Factors affecting tax charge for the year
The tax assessed in the profit and loss account is higher (2015: higher) than the standard UK corporation tax rate, because of the following
factors:

Profit on ordinary activities before tax
Tax calculated at UK standard rate of corporation tax rate of 20.00% (2015: 20.25%)
Non-taxable income from joint ventures and dividends
Other income not taxable
Benefit of deferred tax asset and brought forward losses not previously recognised
Disallowable expenses
Impact of movement in contingent consideration credited to the Income Statement
Capital gains in excess of accounting profit
Share-based payment relief
Impact of rate change on deferred tax
Prior period adjustments – current tax
Prior period adjustment – deferred tax
Total taxation charge

2016
£’000

63,525
12,705
(95)
(510)
–
577
(757)
183
251
(151)
1,009
(179)
13,033

2015
£’000

38,600
7,816
(403)
–
(32)
381
(295)
–
57
(207)
391
430
8,138

The major component of the disallowable expenditure is a permanent disallowance of depreciation on assets which do not qualify for capital
allowances. This is a recurring adjustment with the tax impact of approximately £350,000 being broadly consistent with the prior year. The
remainder of the adjustment relates to non-recurring items of disallowable nature, primarily legal and professional fees incurred in relation to
capital transactions.

The other income not taxable reflects income which has been brought into the charge to corporation tax within a subsidiary’s tax
computation and statutory accounts for the year ended 31st December 2015. The tax impact of this has already been reflected as part of
the prior year adjustments, and so has been adjusted for to ensure that the tax charge is correct.

Unrecognised deferred tax asset relating to:
Losses

2016
£’000

3,365
3,365

2015
£’000

3,823
3,823

The deferred tax assets may be recoverable in the future and this is dependent on subsidiary companies generating taxable profits sufficient
to allow the utilisation of these amounts. These deferred tax assets cannot be offset against profits elsewhere in the Group as they relate to
losses brought forward which can only be offset against taxable profits arising from the same trade in which the losses arose. There is no
time limit for utilisation of the above tax losses and other temporary differences.

(d) Deferred tax
An analysis of the movements in deferred tax is as follows:

Net deferred tax liability at 1st January

Deferred tax liability recognised directly in other comprehensive income

Deferred tax (credit) in Income Statement for the year (Note 14a)

Deferred tax on disposals

Deferred tax liability arising on acquisitions and business combinations

Net deferred tax liability at 31st December

2016
£’000

6,927

2,036

(679)

(5,914)

1,431

3,801

2015
£’000

6,462

505

(40)

–

6,927

113

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

14. Taxation (continued)

Analysed as:

Accelerated capital allowances
Deferred tax liability on separately identifiable intangible assets on business combinations
Deferred tax on financial assets
Deferred tax on Share options
Other short-term temporary differences
Trading losses recognised

Deferred tax credit/(expense) in Income Statement relates to the following:

Intangible assets recognised on business combinations
Accelerated capital allowance
Deferred tax on Share options
Other temporary differences

2016
£’000

(628)
4,267
731
(157)
(318)
(94)
3,801

2016
£’000

590
100
(74)
63
679

2015
£’000

(566)
3,265
4,546
(166)
(53)
(99)
6,927

2015
£’000

295
(135)
(59)
(61)
40

At the end of either year there was no unrecognised deferred tax liability for taxes that would be payable on the unremitted earnings of the
Group’s subsidiaries.

15. Intangible assets

Goodwill

Cost
At 1st January
Arising on acquisitions during the year
At 31st December

Carrying amount of goodwill by operating unit
Estate Agency and Related Services companies
Marsh & Parsons
Your Move
Group First
Reeds Rains
LSLi
Pink Home Loans
First Complete
Templeton LPA
Others

Surveying and Valuation Services company
e.surv

114

2016
£’000

2015
£’000

136,395
15,506
151,901

2016
£’000

40,307
41,636
13,913
16,678
22,512
2,604
3,998
336
348
142,332

9,569
9,569
151,901

131,560
4,835
136,395

2015
£’000

40,307
40,613
–
16,330
22,290
2,604
3,998
336
348
126,826

9,569
9,569
136,395

15. Intangible assets (continued)

Impairment of goodwill and other intangibles with indefinite useful lives
The carrying amount of goodwill by operating unit is given above. The carrying amount of brand by operating unit is as follows:

Estate Agency and Related Services companies
Marsh & Parsons
Your Move
Group First
Reeds Rains
LSLi
Pink Home Loans

Surveying and Valuation Services company
e.surv

2016
£’000

2015
£’000

11,724
2,510
396
1,241
1,675
180
17,726

1,305
1,305
19,031

11,724
2,510
–
1,241
1,675
180
17,330

1,305
1,305
18,635

Goodwill acquired through business combinations and brands has been allocated for impairment testing purposes to statutory companies
or groups of statutory companies which are managed as one cash generating unit as follows:

• Estate Agency and Related Services companies

• Marsh & Parsons

• Your Move (including its share of cash-flows from LSL Corporate Client Department)

• Group First, which includes Mortgages First and Insurance First Brokers

• Reeds Rains

• LSLi1, which includes Intercounty, Frosts, JNP, Goodfellows, Davis Tate, Lauristons, Lawlors, Hawes & Co and Thomas Morris

• Pink Home Loans which includes BDS

• Templeton LPA

• St Trinity

• First Complete

• Surveying and Valuation Services company

• e.surv Chartered Surveyors

Note

1 The Management Team has grouped the subsidiaries of LSLi together for the purposes of this disclosure

Estate Agency and Related Services companies
The recoverable amount of the Estate Agency and Related Services companies has been determined based on a value-in-use calculation
using cash-flow projections based on financial budgets approved by the Board and in the three year plan. The discount rate applied to
cash-flow projections is 9.7% (2015: 9.7%) and cash-flows beyond the three year plan are extrapolated using a 1.5% growth rate (2015:
nil).

Surveying and Valuation Services company
The recoverable amount of the Surveying and Valuation Services company is also determined on a value-in-use basis using cash-flow
projections based on financial budgets approved by the Board and in the three year plan. The discount rate applied to the cash-flow
projections is 9.7% (2015: 9.7%). The growth rate used to extrapolate the cash-flows of the Surveying and Valuation Services company
beyond the three year plan is 1.5% (2015: nil).

115

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

15. Intangible assets (continued)

Key assumptions used in value-in-use calculations
The calculation of value-in-use for each of the Estate Agency and Related Services and Surveying and Valuation Services companies is
most sensitive to the following assumptions:

• Discount rates

• Performance in the market

Discount rates reflect Management’s estimate of the post-tax Weighted Average Cost of Capital (WACC) of the Group and this is grossed
up to arrive at a pre-tax discount rate (using a tax rate of 20.0%) of 9.7%; external advice has been sought for certain elements of the
source data. This is the benchmark used by Management to assess operating performance and to evaluate future acquisition proposals.

Performance in the market reflects how Management believe the business will perform over the three year period and is used to calculate
the value-in-use of the CGUs.

There has been no impairment in respect of the carrying amount of goodwill or brand (an indefinite useful life asset) held on the Balance
Sheet.

Sensitivity to changes in assumptions
Management has undertaken sensitivity analyses to determine the effect of changes in assumptions on the 2016 impairment reviews. The
key assumptions driving the carrying values are the discount rate applied to the cash-flow forecasts and the underlying assumptions within
the cash-flow forecast. Management have considered the various scenarios and concluded that the carrying values of the CGUs are most
sensitive to changes in the discount rate applied. To test the sensitivity the discount rate was increased. For increases up to 220bps the
CGUs carrying values would still exceed the asset value.

Brand
names
£’000

18,826
–

396
–
19,222

191
–
–
191

Customer
contracts
£’000

17,598
–

–
(17,598)
–

17,592
6
(17,598)
–

Insurance
renewals
£’000

5,612
–

–
(5,612)
–

5,612
–
(5,612)
–

Lettings
contracts
£’000

11,351
–

4,603
–
15,954

3,527
2,715
–
6,242

Order
book
£’000

5,451
–

–
(5,451)
–

5,451
–
(5,451)
–

Other 1
£’000

6,169
1,647

–
–
7,816

2,117
1,193
–
3,310

Total
£’000

65,007
1,647

4,999
(28,661)
42,992

34,490
3,914
(28,661)
9,743

19,031

–

9,712

–

4,506

33,249

Other intangible assets

As at 31st December 2016

Cost
At 1st January 2016
Additions
Arising on acquisition
during the year
Disposals
At 31st December 2016)
Aggregate amortisation
and impairment
At 1st January 2016
Charge for the year
Disposals
At 31st December 2016
Carrying amount
At 31st December 2016

116

15. Intangible assets (continued)

As at 31st December 2015

Brand
names
£’000

18,564
–

262
18,826

191
–
191

Customer
contracts
£’000

17,598
–

–
17,598

17,586
6
17,592

Insurance
renewals
£’000

5,612
–

–
5,612

5,612
–
5,612

Lettings
contracts
£’000

2,814
–

8,537
11,351

2,404
1,123
3,527

Order
book
£’000

5,451
–

–
5,451

5,451
–
5,451

Other 1
£’000

2,758
3,230

181
6,169

1,443
674
2,117

Total
£’000

52,797
3,230

8,980
65,007

32,687
1,803
34,490

18,635

–

7,824

–

4,052

30,517

Cost
At 1st January 2015
Additions
Arising on acquisition
during the year
At 31st December 2015
Aggregate amortisation
and impairment
At 1st January 2015
Charge for the year
At 31st December 2015
Carrying amount
At 31st December 2015

Note

1 Other relates to in-house software and Estate Agency franchise agreements.

The brand value relates to the following:

• Your Move, a network of residential sales and lettings agencies and e.surv, a surveying and valuation company which were acquired in

2004;

• Reeds Rains, a network of residential sales and lettings agencies which was acquired in October 2005;

• Intercounty, a network of residential sales and lettings agencies which was acquired in February 2007;

• Frosts, a network of residential sales and lettings agencies which was acquired in July 2007;

• JNP, a network of residential sales and lettings agencies which was acquired in September 2007;

• Goodfellows, a network of residential sales and lettings agencies which was acquired in May 2010;

• Pink Home Loans and BDS intermediary networks which were acquired in December 2010;

• Marsh & Parsons, a network of residential sales and lettings agencies which was acquired in November 2011;

• Davis Tate, a network of residential sales and lettings agencies which was acquired in February 2012;

• Lauristons, a network of residential sales and lettings agencies which was acquired in July 2012;

• Walker Fraser Steele, a surveying business which was acquired in June 2013;

• Lawlors, a network of residential sales and lettings agencies which was acquired in September 2013;

• Hawes & Co, a network of residential sales and lettings agencies which was acquired in March 2014;

• Thomas Morris, a network of residential sales and lettings agencies which was acquired in February 2015; and

• Group First, a mortgage, pure protection and general insurance brokerage business which was acquired in 2016.

The businesses are run as separate reporting units within the Group. There have been no fundamental changes to the manner in which the
businesses have been run since their acquisition and therefore the results of the businesses are considered to be derived from the brand
names nationally.

During the year Management reviewed fully amortised intangibles and judged that these should be derecognised in the period.

117

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

16. Property, plant and equipment

As at 31st December 2016

Cost
At 1st January 2016
Acquisitions during the year
Additions
Disposals
At 31st December 2016
Depreciation and impairment
At 1st January 2016
Acquisitions during the year
Charge for the year
Disposals
At 31st December 2016
Carrying amount

At 31st December 2016

Freehold land and
buildings
£’000

Leasehold
improvements
£’000

Motor
vehicles
£’000

Fixtures, fittings
and computer
equipment
£’000

1,892
600
5
–
2,497

300
–
–
–
300

11,971
–
788
(3,563)
9,196

5,755
–
892
(3,553)
3,094

182
–
40
(126)
96

107
–
14
(58)
63

39,641
249
3,772
(15,888)
27,774

28,131
–
4,569
(15,436)
17,264

Total
£’000

53,686
849
4,605
(19,577)
39,563

34,293
–
5,475
(19,047)
20,721

2,197

6,102

10,510

18,842

Assets with a book value of £530,000 (2015: £372,000) were disposed of in the year. This includes assets with a book value totalling
£78,000 (2015: £82,000) were sold for net proceeds of £69,000 (2015: £121,000), resulting in a loss on disposal of £9,000 (2015: profit of
£39,000).

As at 31st December 2015

Cost
At 1st January 2015
Acquisitions during the year
Additions
Disposals
At 31st December 2015
Depreciation and impairment
At 1st January 2015
Charge for the year
Disposals
At 31st December 2015
Carrying amount

At 31st December 2015

Freehold land and
buildings
£’000

Leasehold
improvements
£’000

Motor
vehicles
£’000

Fixtures, fittings
and computer
equipment
£’000

2,138
–
–
(246)
1,892

300
–
–
300

10,906
–
1,065
–
11,971

4,853
902
–
5,755

359
–
33
(210)
182

197
39
(129)
107

36,063
28
3,663
(113)
39,641

23,844
4,355
(68)
28,131

Total
£’000

49,466
28
4,761
(569)
53,686

29,194
5,296
(197)
34,293

1,592

6,216

11,510

19,393

In 2015 a freehold property with a book value totalling £246,000 was sold for net proceeds of £163,000 resulting in a loss on disposal
£83,000.

118

17. Financial assets

Available-for-sale financial assets

Unquoted shares at fair value
Quoted shares at fair value

Opening balance
Additions
Disposals
Fair value adjustment recorded through reserves
Closing balance

2016
£’000

4,603
–
4,603
28,871
–
(36,083)
11,815
4,603

2015
£’000

1,774
27,097
28,871
23,033
1,178
(470)
5,130
28,871

The financial assets include unlisted equity instruments which are carried at fair value. Fair value is judgemental given the assumptions
required and have been valued using level 3 valuation techniques (see Note 30). Financial assets in 2015 also included shares in Zoopla
which are listed on the London Stock Exchange and were carried at fair value. These shares were valued using a level 1 valuation
technique.

Zoopla
Between 20th July 2016 and 31st October 2016, LSL sold its entire holding of 11.3m ordinary shares in Zoopla for total proceeds of £36.1m
at an average price per share of £3.19.

At 31st December 2015 the Zoopla share price was £2.40 per share, the Directors considered the best estimate of the fair value of LSL’s
investment in Zoopla to be the current share price which valued the Group’s stake in Zoopla at £27,097,000. Subsequent to the 2015
interim date, Zoopla completed an anniversary offer allowing LSL to subscribe for a further 619,318 shares at the £2.20 IPO price with a
20% discount. These were taken up by LSL. At the same time, a further 169,350 shares were sold through the anniversary member offer at
£1.76 with net proceeds of £297,000.

In January 2017 Zoopla (now known as ZPG) issued the Group with 226,711 warrants in accordance with the 2016 service agreement.

VEM
The carrying value of the Group’s investment in VEM at 31st December 2016 has been assessed as £912,000 (2015: £912,000).

GPEA
The carrying value of the Group’s investment in GPEA at 31st December 2016 has been assessed and revalued to £3,691,000 (2015:
£862,000).

18. Investments in joint ventures

Investment in joint ventures
Opening balance
Acquisitions
Equity accounted profit
Dividend received
Closing balance

2016
£’000

8,762
8,778
2
(18)
–
8,762

2015
£’000

8,778
9,121
–
1,156
(1,499)
8,778

The Group has a 33.33% (2015: 33.33%) interest in TM Group, a joint venture whose principal activity is to provide searches. The principle
place of business of TM Group is the United Kingdom.

The Group also has a 50.00% (2015: 49.99%) interest in LMS, a joint venture whose principal activity is to provide conveyancing panel
management services. The principle place of business of LMS is the United Kingdom.

119

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports
Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

18. Investments in joint ventures (continued)

The share of the assets, liabilities, income and expenses of the joint ventures at 31st December and for the years then ended are as follows:

Share of the joint ventures’ balance sheets:
Non-current assets
Current assets
Current liabilities
Share of net assets

Share of the joint ventures’ results:
Revenue
Operating expenses
Operating profit
Finance income
Profit before tax
Taxation
Profit after tax
Shareholder rebate
Income from joint ventures

2016
£’000

6,474
5,408
(3,120)
8,762

2015
£’000

6,547
5,478
(3,247)
8,778

2016
£’000

2015
£’000

29,980
(30,019)
(39)
17
(22)
4
(18)
1,067
1,049

29,319
(27,631)
1,688
24
1,712
(556)
1,156
–
1,156

Non-current assets include £5,008,000 (2015: £5,008,000) in respect of goodwill arising on the acquisition of shares in LMS. The
shareholder rebate received in 2016 was from TM Group.

19. Trade and other receivables

Current
Trade receivables
Prepayments and accrued income

2016
£’000

2015
£’000

20,209
12,054
32,263

23,234
12,132
35,366

Trade receivables are non-interest bearing and are generally on 4-30 day terms depending on the services to which they relate.

As at 31st December 2016, trade receivables with a nominal value of £2,546,000 (2015: £2,518,000) were impaired and fully provided for.
Movements in the provision for impairment of receivables were as follows:

2016
£’000

2,518
839
(811)
2,546

2015
£’000

2,184
583
(249)
2,518

At 1st January
Charge for the year
Amounts written off
At 31st December

120

19. Trade and other receivables (continued)

As at 31st December, the analysis of trade receivables that were past due but not impaired is as follows:

2016
2015

20. Cash and cash equivalents

Short-term deposits

Total
£’000

20,209
23,234

Neither past due
nor impaired
£’000

12,955
15,217

Past due but not impaired

0-90 days
£’000

6,708
7,686

2016
£’000

–

>90 days
£’000

546
331

2015
£’000

5,603

Cash at bank earns interest at floating rates based on daily bank overnight deposit rates. Short-term deposits are made for varying periods
of between one day and three days depending on the immediate cash requirements of the Group, and earn interest at the respective short-
term deposit rates. The fair value of cash and cash equivalents is £nil (2015: £5,603,000). At 31st December 2016, the Group had available
£83.5m of undrawn committed borrowing facilities in respect of which all conditions precedent had been met (2015: £54.5m).

21. Trade and other payables

Current

Trade payables
Other taxes and social security payable
Other payables
Accruals

Terms and conditions of the above financial liabilities:

• Trade payables are non-interest bearing and are normally settled on between 30 and 60 day terms.

• Other payables are mainly non-interest bearing and have an average term of three months.

22. Financial liabilities

Current
Overdraft
12% unsecured loan notes
Deferred consideration
Contingent consideration

Non-current
Bank loans – revolving credit facility (RCF)
2% unsecured loan notes
Deferred consideration
Contingent consideration

2016
£’000

2015
£’000

7,150
10,186
633
32,931
50,900

7,327
11,787
725
30,263
50,102

2016
£’000

2015
£’000

3,756
–
4,790
2,193
10,739

16,500
2,000
66
7,903
26,469

–
10,033
2,422
3,322
15,777

45,500
–
447
6,564
52,511

Bank loans – revolving credit facility and overdraft
A £100.0m loan facility which was due to expire in August 2017 was amended and extended in May 2016 and now expires in May 2020.
Loan refinance costs were incurred in June 2013 which have been capitalised and are being amortised over the life of the original loan
facility, further costs were incurred in June 2016 and have been capitalised and are being amortised over the life of the amended loan.

121

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

22. Financial liabilities (continued)

The bank loan totalling £16.5m (2015: £45.5m) and overdraft totalling £3.8m (2015: £nil) are secured via cross guarantees issued from all of
the Group’s subsidiaries excluding the following subsidiaries, Barnwoods, Homefast, Linear (Linear Mortgage Network and Linear Financial
Services), Templeton LPA, Chancellors Associates and LSLi and the LSLi subsidiaries.

The utilisation of the revolving credit facility may vary each month as long as this does not exceed the maximum
£100m facility (2015: £100.0m). The Group’s overdraft is also secured on the same facility, and the combined overdraft and revolving credit
facility cannot exceed £100.0m (2015: £100.0m). The banking facility is repayable when funds permit on or by May 2020.

Interest and fees payable on the revolving credit facility amounted to £1.8m (2015: £1.8m). The interest rate applicable to the facility
is LIBOR plus a margin rate; the margin rate is linked to the leverage ratio of the Group and the margin rate is reviewed at six monthly
intervals.

12% and 2% unsecured loan notes
The 12% unsecured loan notes were issued as part satisfaction of the consideration for the acquisition of Marsh & Parsons in 2011. £1.7m
of these loan notes was redeemed in February 2016. A variation of the 2011 loan notes was agreed on the retirement of Peter Rollings in
March 2016. The total principle amount of the 2011 Loan Note will be paid but at a reduced rate of interest of 2%. The first instalment was
paid in July 2016, and a final payment of £2m is due in March 2018, subject to certain conditions being satisfied.

Deferred consideration
Deferred consideration totalling £240,000 is payable during 2017 and £66,000 is payable in 2020. Additionally there is £4,550,000 payable
in relation to the purchase of Group First in 2016 (Note 28).

Deferred Consideration

Marsh & Parsons

LMS

Group First

LSLi

Contingent consideration

Marsh & Parsons Growth Shares

LSLi contingent consideration
LMS
Group First
Other

Opening balance
Cash paid
Acquisition
Amounts recorded through Income Statement
Closing balance

2016
£’000

–

4,550

306

4,856

2016
£’000

–

3,419
1
6,339
337
10,096
9,886
(3,537)
6,598
(2,851)
10,096

2015
£’000

447

2,422

–

2,869

2015
£’000

1,518

4,790
3,093
–
485
9,886
13,730
(4,015)
1,178
(1,007)
9,886

Nil (2015: £1,518,000) contingent consideration relates to the Growth Shares acquired by the management of Marsh & Parsons
subsequent to acquisition as an incentive to grow the Marsh & Parsons business. Holders of Growth Shares have the option to require
LSL to buy their Growth Shares at any time between 1st January 2016 and 1st April 2020, at their discretion, at a price determined by a
multiple of EBITDA in the previous financial year. The payment of the consideration is contingent on the holder of the Growth Shares being
continuously employed by the relevant company and consequently the expected value of the Growth Shares is charged to the Income
Statement over the earn-out period.

122

22. Financial liabilities (continued)

£3,491,000 (2015: £4,790,000) of contingent consideration relates to payments to third parties in relation to the acquisition of LSLi and
certain of its subsidiaries between 2007 and 2016. This is payable between three and five years after the acquisition dates depending on
the profitability of those subsidiaries in the relevant years. In 2016, the contingent consideration has been recalculated using a discount rate
of 6.5% (2015: 6.5%).

During 2016 £5,247,000 of deferred and contingent consideration was paid to third parties in relation to the acquisition of LMS shares in
September 2014.

The table below shows the allocation of the contingent consideration balance and income charge between the various categories:

Remuneration
Put options over non-controlling interests
Arrangement under IFRS 3
Closing balance
Contingent consideration profit and loss impact in the period relating to amounts accounted for as:
Remuneration
Put options over non-controlling interests
Arrangement under IFRS 3
Unwinding of discount on contingent consideration
(credit)

2016
£’000

2,076
1
8,019
10,096

(1,412)
(268)
(1,657)
486
(2,851)

23. Provisions for liabilities

Balance at 1st January
Amount utilised
Amount released
Unwinding of discount
Provided in financial year
Balance at 31st December
Current
Non-current

2016

2015

Professional
indemnity claim
provision
£’000

29,672
(8,126)
(1,600)
200
540
20,686
5,385
15,301
20,686

Onerous
leases
£’000

53
(137)
(6)
–
768
678
357
321
678

Professional
indemnity claim
(PI Costs)
provision
£’000

38,719
(11,156)
–
159
1,950
29,672
12,056
17,616
29,672

Total
£’000

29,725
(8,263)
(1,606)
200
1,308
21,364
5,742
15,622
21,364

Onerous
leases
£’000

192
(6)
(133)
–
–
53
44
9
53

2015
£’000

3,362
3,093
3,431
9,886

(2,739)
1,799
(519)
452
(1,007)

Total
£’000

38,911
(11,162)
(133)
159
1,950
29,725
12,100
17,625
29,725

Professional Indemnity claim (PI Costs) provision
The PI Costs provision is to cover the costs of claims relating to valuation services for clients which are not covered by PI insurance. The PI
Costs provision includes amounts for claims already received from clients, claims yet to be received and any other amounts which may be
payable as a result of legal disputes associated with provision of valuation services.

The provision is the Directors’ best estimate of the likely outcome of such claims, taking account of the incidence of such claims and
the size of the loss that may be borne by the claimant, after taking account of actions that can be taken to mitigate losses. The PI Costs
provision will be utilised as individual claims are settled and the settlement amount may vary from the amount provided depending on
the outcome of each claim. It is not possible to estimate the timing of payment of all claims and therefore a significant proportion of the
provision has been classified as non-current.

As at 31st December 2016 the total provision for PI Costs was £20.7m. The Directors have considered the sensitivity analysis on the key
risks and uncertainties discussed above.

123

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

23. Provisions for liabilities (continued)

Cost per claim
A substantial element of the PI Costs provision relates to specific claims where disputes are ongoing. These specific cases have been
separately assessed and specific provisions have been made. The average cost per claim has been used to calculate the IBNR. Should the
costs to settle and resolve these claims and future claims increase by 10%, an additional £1.7m would be required.

Rate of claim
The IBNR assumes that the rate of claim for the high risk lending period in particular reduces over time. Should the rate of reduction be
lower than anticipated and the duration extend, further costs may arise. An increase of 30% in notifications in excess of that assumed in the
IBNR calculations would increase the required provision by £0.5m.

Notifications
The Company has received a number of notifications which have not deteriorated into claims or loss. Should the rate of deterioration
increase by 50%, an additional provision of £0.3m would be required.

Onerous lease provision
The provision for lease obligations relates to obligations under leases on vacant properties. The provision is expected to be fully utilised by
January 2021. The final outcome depends upon the ability of the Group to sublet or assign the lease over the related properties.

24. Obligations under leases

Operating leases
The Group had annual commitments in respect of non-cancellable operating leases for which no provision has been made in these
Financial Statements (other than the onerous lease provision as disclosed in Note 23). Future minimum rentals payable under these
operating leases are as follows:

No later than one year
After one year but not more than five
years
After five years

Land
and
building
£’000

8,128

16,947
7,569
32,644

2016

Plant
and
machinery
£’000

3,215

2,849
–
6,064

Total
£’000

11,343

19,796
7,569
38,708

Land
and
building
£’000

7,025

16,211
9,509
32,745

2015

Plant
and
machinery
£’000

3,530

3,358
–
6,888

Total
£’000

10,555

19,569
9,509
39,633

The Group had annual committed revenue in respect of non-cancellable operating leases for which no accrual has been made in these
Financial Statements. Future minimum rentals receivable under non-cancellable operating leases are as follows:

Not later than one year
After one year but not more than five years
After five years

25. Share capital

Authorised:
Ordinary Shares of 0.2p each
Issued and fully paid:
At 1st January and 31st December

124

2016
Land
and
buildings
£’000

339
689
306
1,334

2015
Land
and
buildings
£’000

307
644
376
1,327

2016

2015

£’000

500,000,000

1,000 500,000,000

1,000

104,158,950

208 104,158,950

208

26. Reserves

Share premium
The amount subscribed for share capital in excess of nominal value less any costs attributable to the issue of new shares.

Share-based payment reserve
The share-based payment reserve is used to record the value of equity-settled share-based payment provided to the employees, as part of
their remuneration. Note 13 gives further details of these plans.

Treasury shares
Treasury shares represent the cost of Shares purchased in the market and held by the Trust to satisfy future exercise of options under the
Group’s employee share options schemes. At 31st December 2016 the Trust held 1,530,716 (2015: 1,707,671) Shares at an average cost
of £3.51 (2015: £3.51). The market value of the Shares at 31st December 2016 was £3,535,954 (2015: £4,867,000 ). The nominal value of
each Share is 0.2p.

Fair value reserve
The fair value reserve is used to record the changes in fair value of financial assets held for sale. Note 17 gives further details of the
movement in the current year.

27. Pension costs and commitments

The Group operates defined contribution pension schemes for certain Executive Directors and certain employees. The assets of the
schemes are held separately from those of the Group in independently administered funds.

Total contributions to the defined contribution schemes in the year were £2,388,000 (2015: £2,274,000). There was an outstanding amount
of £390,000 in respect of pensions as at 31st December 2016 (2015: £306,000).

28. Acquisitions during the year

Year ended 31st December 2016
The Group acquired the following businesses during the prior year:

a. Lettings books and other
During the period the Group acquired nine lettings books and bought back a two branch estate agency businesses from a total combined
consideration of £4,241,000. The fair values of the identifiable assets and liabilities of these businesses as at the date of acquisition have
been provisionally determined as below:

Intangible assets
Cash and cash equivalents
Deferred tax liabilities
Total identifiable net liabilities acquired
Purchase consideration
Goodwill
Purchase consideration discharged by:
Cash
Deferred consideration
Contingent consideration cash

Fair value
recognised on
acquisition
£’000

4,190
51
(1,593)
2,648
4,241
1,593

3,901
323
17
4,241

125

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

28. Acquisitions during the year (continued)

Analysis of cash-flow on acquisition
Transaction costs (included in cash-flows from operating activities)
Net cash acquired with the subsidiaries and other businesses
Purchase consideration discharged in cash (included in cash-flows from investing activities)
Net cash outflow on acquisition

£’000

55
(51)
3,883
3,887

b. Group First
In February 2016, the Group, through a wholly owned subsidiary, acquired 65% interest in Group First, who provide mortgage and
protection brokerage services to the purchasers of new homes through its subsidiaries, Mortgages First and Insurance First Brokers. The
consideration for the initial investment is £9.1m cash with 50% paid on completion, and a further 50% payable in 2017. The remaining
35% is subject to put and call options which are exercisable between 2018 and 2020. The contingent consideration is Management’s best
estimation of the probable discounted payout (using a rate of 6.5%), based upon current forecasts over the earn-out period. Due to the
nature of the payment terms, the contingent consideration is considered to be a capital payment for accounting purposes. The fair value of
the identifiable assets and liabilities as at the date of acquisition have been determined as below:

Intangible assets
Property, plant and equipment
Trade and other receivables (no impairment identified)
Cash and cash equivalents
Trade and other payables
Current tax
Deferred tax liabilities
Total identifiable net assets acquired
Purchase consideration
Goodwill
Purchase consideration discharged by:
Cash
Deferred consideration
Contingent consideration

Fair value
recognised on
acquisition
£’000

809
847
127
1,542
(1,501)
(216)
160
1,768
15,681
13,913

4,550
4,550
6,581
15,681

The goodwill of Group First comprises certain intangible assets that cannot be individually separated and reliably measured from the
acquiree due to their nature. These items include relationships with a number of house builders, an experienced Management team with
a good record of delivering a quality service to customers, the expected value of synergies and the potential to significantly grow the
business. None of the goodwill is expected to be deductible for tax purposes.

As defined in IFRS 3 the Group has recognised, separately from goodwill, the identifiable intangible assets acquired in the business
combination. The assets identified include the Group First brand and the pipeline of work acquired. As disclosed to the market on
acquisition, there are strong customer relationships between Group First and key house builders, however, these relationships do not
qualify as an intangible asset given they do not fulfil either the separability criterion or the contractual-legal criterion. This has been fully
explored by Management and Management are confident that given that no economic benefit passes between the two parties in this
relationship (the housebuilder and Group First) there is no asset that can be “separated or divided” and “sold, transferred, licensed, rented
or exchanged”.

Group First has contributed £1,924,000 profit before tax and £6,913,000 revenue in the period since acquisition. If it had been acquired
at the beginning of the year then the consolidated revenue would have been £920,000 higher and the consolidated profit before tax would
have been £222,000 higher. An analysis of cash-flow on acquisition is given in the table opposite.

126

28. Acquisitions during the year (continued)

c. Total acquisitions
At 31st December 2016, the acquisitions in aggregate, including Group First, have contributed £7,979,000 of revenue and £2,609,000 profit
before tax to the Group, excluding the impact of movements in the contingent consideration recorded through the profit and loss. If all of
these combinations had taken place at the beginning of the year, the consolidated revenue would have been higher by £1,749,000 and the
consolidated profit before tax would have been higher by £593,000. Transaction costs have been expensed.

Transaction costs
Net cash acquired with the subsidiaries and other businesses
Purchase consideration discharged
Net cash outflow on acquisition

Year ended 31st December 2015
The Group acquired the following businesses during the prior year:

£’000

55
(1,593)
8,433
6,895

a. Lettings books
During the period the Group acquired 30 lettings businesses for a total consideration of £9,079,000. The identifiable net assets acquired
consist of intangible assets of £7,784,000, cash and cash equivalents of £426,000 and goodwill of £869,000.

The combined fair values of the identifiable assets and liabilities at the date of above acquisition have been determined as below:

Intangible assets
Cash and cash equivalents
Total identifiable net liabilities acquired
Purchase consideration
Goodwill
Purchase consideration discharged by:
Cash
Contingent consideration

Analysis of cash-flow on acquisition
Transaction costs (included in cash-flows from operating activities)
Net cash acquired with the subsidiary (included in cash-flows from investing activities)
Purchase consideration discharged in cash (included in cash-flows from investing activities)
Net cash outflow on acquisition

Fair value
recognised on
acquisition
£’000

7,784
426
8,210
9,079
869

9,054
25
9,079

£’000

21
(426)
9,054
8,649

b. Thomas Morris
In February 2015, the Group acquired 80% of Thomas Morris, a seven branch estate agency chain in Cambridgeshire, Bedfordshire and
Hertfordshire for an initial consideration of £4.1m. The remaining 20% is subject to put and call options which are exercisable between 2018
and 2020 dependent on profit performance. Due to the nature of the payment terms, the contingent consideration is considered to be a
capital payment for accounting purposes.

127

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

28. Acquisitions during the year (continued)

The fair value of the identifiable assets and liabilities of Thomas Morris as at the date of acquisition have been determined as below:

Intangible assets
Property, plant and equipment
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Current tax liabilities
Total identifiable net liabilities acquired
Purchase consideration
Goodwill
Purchase consideration discharged by:
Cash
Contingent consideration

Fair value
recognised on
acquisition
£’000

1,209
28
177
348
(202)
(224)
1,336
5,301
3,965

4,148
1,153
5,301

The goodwill of Thomas Morris comprises certain intangible assets that cannot be individually separated and reliably measured from the
acquiree due to their nature. These items include an experienced management team with a good record of delivering a quality service to
customers, the expected value of synergies and the potential to significantly grow the business. No determination has been made yet as to
what proportion, if any, of the goodwill will be tax deductible. Thomas Morris has contributed £762,000 profit before tax and £4,226,000
revenue in the period since acquisition. If it had been acquired at the beginning of the year then the consolidated revenue would have been
£782,000 higher and the consolidated profit before tax would have been £114,000 higher. An analysis of cash-flow on acquisition is given
in the table below:

Transaction costs have been expensed and are included under operating expenses.

£’000

26
(348)
4,148
3,826

29. Client monies

As at 31st December 2016, monies held by subsidiaries in separate bank accounts on behalf of clients amounted to £100,627,000 (2015:
£93,837,000). Neither this amount, nor the matching liabilities to the clients concerned are included in the Group Balance Sheet.

30. Financial instruments – risk management

The Group’s principal financial instruments comprise bank loans and other loans. The main purpose of these financial instruments is to raise
finance for the Group’s operations and to fund acquisitions. The Group has various financial assets and liabilities such as trade receivables,
cash and short-term deposits and trade payables, which arise directly from its operations.

The Group is exposed through its operations to the following financial risks:

• Cash-flow interest rate risk;

• liquidity risk; and

• credit risk.

128

30. Financial instruments – risk management (continued)

Policy for managing these risks is set up by the Board following recommendations from the Group Chief Financial Officer. Certain risks are
managed centrally, while others are managed locally following communications from the centre. The policy for each of the above risks is
described in more detail below.

Cash-flow interest rate risk
The Group’s exposure to the risk of changes in market interest rates relates primarily to the Group’s long-term debt obligations with floating
interest rates.

The majority of external Group borrowings are variable interest based and this policy is managed centrally. The subsidiaries are not
permitted to borrow from external sources directly without approval from the Group Finance team.

The following table demonstrates the sensitivity to a reasonably possible change in interest rates on loans and borrowings. With all other
variables held constant, the Group’s profit before tax is affected through the impact on floating rate borrowings as follows. There is no
material impact on the Group’s equity.

2016

2015

Increase/
decrease in basis
point

Effect on profit
before tax
£’000

+100
-100
+100
-100

(165)
165
(455)
455

Liquidity risk
The Group aims to mitigate liquidity risk by managing cash generation by its operations, dividend policy and acquisition strategy.
Acquisitions are carefully selected with authorisation limits operating up to Board level and cash payback periods applied as part of the
investment appraisal process. In this way the Group aims to maintain a good credit rating to facilitate fundraising. The Group is also very
cash generative as demonstrated by the cash from operations. The Group has net current liabilities due to the operating model where
debtors are collected earlier than payments to creditors, allowing the cash to be used elsewhere in the business such as to reduce the
amount drawn down on the revolving credit facility and to make acquisitions. However, the requirement to pay creditors is managed
through future cash generation and, if required, from the revolving credit facility.

The Group monitors its risk to a shortage of funds using a recurring liquidity planning tool and daily cash-flow reporting. This includes
consideration of the maturity of both its financial investments and financial assets (e.g. accounts receivable, and other financial assets)
and projected cash-flows from operations. The Group’s objective is to maintain a balance between continuity of funding and flexibility for
potential acquisitions through the use of its banking facilities.

The table below summarises the maturity profile of the Group’s financial liabilities at 31st December 2016 based on contractual
undiscounted payments:

Year ended 31st December 2016

Interest bearing loans and borrowings
(including overdraft)
Trade payables
Contingent consideration
Deferred consideration

On demand
£’000

Less than
3 months
£’000

3 to 12 months
£’000

1 to 5 years
£’000

> 5 years
£’000

Total
£’000

3,756
–
–
–
3,756

139
7,150
29
–
7,318

425
–
2,165
4,790
7,380

19,863
–
10,122
66
30,051

–
–
–
–
–

24,183
7,150
12,316
4,856
48,505

129

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

30. Financial instruments – risk management (continued)

Year ended 31st December 2015

Interest bearing loans and borrowings
(including overdraft)
Trade payables
Contingent consideration
Deferred consideration

On demand
£’000

–
–
–
–
–

Less than
3 months
£’000

423
7,327
57
–
7,807

3 to 12 months
£’000

1 to 5 years
£’000

> 5 years
£’000

Total
£’000

11,327
–
5,254
2,422
19,003

46,403
–
5,188
575
52,166

–
–
–
–
–

58,153
7,327
10,499
2,997
78,976

The liquidity risk of each Group entity is managed centrally by the Group Treasury function. The Group’s cash requirement is monitored
closely. All surplus cash is held centrally to offset against the Group’s borrowings and reduce the interest payable. The type of cash
instrument used and its maturity date will depend on the Group’s forecast cash requirements. The Group has a revolving credit facility with
a syndicate of major banking corporations to manage longer term borrowing requirements.

Capital management
The primary objective of the Group’s capital management is to ensure that it maintains appropriate capital structure to support its business
objectives, including any regulatory requirements, and maximise Shareholder value. Capital includes Share capital and other equity
attributable to the equity holders of the Parent Company.

In the medium to long-term, the Group will strive to maintain a reasonable leverage (i.e. balance between debt and equity) to help achieve
the Group’s business objectives of growth (through acquisitions and organic growth) and dividend policy. In the short-term, the Group does
not have a set leverage ratio to be achieved but the Directors monitor the ratio of net debt to operating profit to ensure that the debt funding
is not excessively high. Certain loan notes issued on acquisition of Marsh & Parsons are excluded from this ratio as they are unsecured and
are not used in the calculation of the Group’s banking covenant.

The Group has a current ratio of Net Bank Debt (excluding loan notes) to EBITDA of 0.51 (2015: 0.83), based on Net Bank Debt (excluding
loan notes) of £20.3m (2015: £39.9m) and operating profit before exceptional costs, amortisation and share-based payment charge of
£34.6m (2015: £42.9m). The business is cash generative with a low capital expenditure requirement. The Group remains committed to its
stated dividend policy of 30% to 40% of Group Underlying Operating Profit after interest and tax. The Board has reviewed the policy in line
with the risks and capital management decisions facing the Group.

Net Bank Debt is defined as follows:

Interest bearing loans and borrowings (including loan notes and overdraft)
Less: 2% and 12% unsecured loan notes
Less: cash and short-term deposits
Less: deferred and contingent consideration
Net Bank Debt (excluding loan notes)

2016
£’000

37,208
(2,000)
–
(14,952)
20,256

2015
£’000

68,288
(10,033)
(5,603)
(12,755)
39,897

Credit risk
There are no significant concentrations of credit risk within the Group. The Group is exposed to a credit risk in respect of revenue
transactions (i.e. turnover from customers). It is Group policy, implemented locally, to obtain appropriate details of new customers before
entering into contracts. The majority of the Estate Agency customers use the Group’s services as part of a house sale transaction and
consequently the debt is paid from the proceeds realised from the sale of the house by the vendor’s solicitor before the balance of funds is
transferred to the vendor. These minimise the risk of the debt not being collected.

The majority of the Surveying customers and those of the Asset Management business are large financial institutions and as such the credit
risk is not expected to be significant. The maximum credit risk exposure relating to financial assets is represented by the carrying value as at
the balance sheet date.

130

30. Financial instruments – risk management (continued)

Interest rate risk profile of financial assets and liabilities
Treasury policy is described in the Note above. The disclosures below exclude short-term receivables and payables which are primarily of a
trading nature and expected to be settled within normal commercial terms.

The interest rate profile of the financial assets and liabilities of the Group as at 31st December 2016 are as follows:

Fixed rate
Revolving credit facility
Interest bearing loans
Floating rate
Cash and cash equivalents
Revolving credit facility

Within 1 year
£’000

1-2
years
£’000

2-3
years
£’000

3-4
years
£’000

Total
£’000

(2,000)

–
–

(3,756)
(16,500)

–
–

(2,000)

(3,756)
(16,500)

The effective interest rate and the actual interest rate charged on the loans in 2016 are as follows:

Revolving credit facility
2% unsecured loan notes

Effective rate

Actual rate

3.7%
2.0%

1.3%
2.0%

The effective interest rate on the revolving credit facility during the year is higher than the actual rate due to commitment fees payable on
undrawn amounts.

The interest rate profile of the financial assets and liabilities of the Group as at 31st December 2015 are as follows:

Fixed rate
Revolving credit facility
Interest bearing loans
Floating rate
Cash and cash equivalents
Revolving credit facility

Within 1 year
£’000

–
(10,033)

5,603
(45,500)

1-2
years
£’000

2-3
years
£’000

–
–

3-4
years
£’000

–
–

Total
£’000

–
(10,033)

5,603
(45,500)

The effective interest rate and the actual interest rate charged on the loans in 2015 are as follows:

Revolving credit facility
2% unsecured loan notes
12% unsecured loan notes

Effective rate

Actual rate

3.2%
2%
3.65%

2%
2%
12%

The effective interest rate on the revolving credit facility during the year is high due to commitment fees payable on undrawn amounts earlier
in the year. The effective rate on 12% unsecured loan note is low due to the loan note being recorded at fair value on initial issue in 2011.

131

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

30. Financial instruments – risk management (continued)

Fair values of financial assets and financial liabilities
Set out below is a comparison by category of carrying amounts and fair values of all of the Group’s financial instruments that are carried in
the Financial Statement:

Financial assets
Cash and cash equivalents
Available-for-sale financial assets
Financial liabilities
Interest-bearing loans and borrowings:
Floating rate borrowings
Contingent consideration
Deferred consideration
12% and 2% unsecured loan notes

2016

2015

Book value
£’000

Fair value
£’000

Book value
£’000

Fair value
£’000

(3,756)
4,603

5,603
28,871

(16,500)
(10,096)
(4,856)
(2,000)

(45,500)
(9,886)
(2,869)
(10,033)

The fair values for the majority of the financial instruments have been calculated by discounting the expected future cash-flows at interest
rates prevailing for a comparable maturity period for each instrument.

Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of the financial instruments by valuation technique:

• Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

• Level 2:

other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or
indirectly; and

• Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market

data.

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities.

2016

Assets measured at fair value
Financial assets

Liabilities measured at fair value
Contingent consideration

Liabilities for which fair values are disclosed
Interest-bearing loans and borrowings:
Floating rate borrowings
2% unsecured loan notes
Deferred consideration

£’000

4,603

10,096

16,500
2,000
4,856

Level 1
£’000

Level 2
£’000

16,500
2,000

Level 3
£’000

4,603

10,096

4,856

132

30. Financial instruments – risk management (continued)

2015

Assets measured at fair value
Financial assets

Liabilities measured at fair value
Contingent consideration

Liabilities for which fair values are disclosed
Interest-bearing loans and borrowings:
Floating rate borrowings
12% unsecured loan notes
Deferred consideration

£’000

Level 1
£’000

Level 2
£’000

28,871

27,097

9,886

45,500
10,033
2,869

–

–
–
–

–

45,500
10,033
–

Level 3
£’000

1,774

9,886

–
–
2,869

The investments totaling £4,603,000 are valued using Level 3 valuation techniques. The Directors reviewed the fair value of the financial
assets at 31st December 2016 using an independently sourced multiple times average EBITDA methodology. The underlying value of the
business is driven by the profitability of these businesses. If this was to drop by 10%, the implied valuation is likely to also drop by around
10%, £0.5m.

The contingent consideration relates to amounts payable in the future on acquisitions. The amounts payable are based on the amounts
agreed in the contracts and based on the future profitability of each entity acquired. In valuing each provision, estimates have been made
as to when the options are likely to be exercised and the future profitability of the entity at this date. Further details of these provisions are
shown in Note 22.

If the future profitability of the entities was to decline by 10%, the size of the contingent consideration would decrease by approximately
£2.0m.

Fair values of the Group’s interest-bearing borrowings and loans are determined by using discounted cash-flow (DCF) methodology using
a discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non-performance risk as at 31st
December 2016 was assessed to be insignificant.

31. Analysis of Net Bank Debt (excluding loan notes)

Interest bearing loans and borrowings
– Current
– Non-current

Less: unsecured loan notes
Less: cash and short-term deposits
Less: deferred and contingent consideration
Net Bank Debt at the end of the year

2016
£’000

2015
£’000

10,739
26,469
37,208
(2,000)

(14,952)
20,256

15,777
52,511
68,288
(10,033)
(5,603)
(12,755)
39,897

During the year, the Group has repaid £29.0m (2015: drawn down £11.5m) of the revolving credit facility. The utilisation of this revolving
credit facility may vary each month as long as this does not exceed the maximum £100.0m facility (2015: £100.0m).

133

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Notes to the Group Financial Statements continued.
for the year ended 31st December 2016

32. Related party transactions

As disclosed in Note 18 LSL has two joint ventures LMS and TM Group.

Transactions with LMS and its subsidiaries

Sales

Transactions with TM Group and its subsidiaries

Sales
Purchases
Year-end creditor balance

33. Capital commitments

Capital expenditure contracted for but not provided

2016
£’000

1,273
(41)
(8)

2016
£’000

628

2015
£’000

1,336
(40)
(2)

2015
£’000

118

134

34. Subsidiary and joint venture companies

The Group owns directly or indirectly the following issued and fully paid ordinary and preference share capital of its subsidiary undertakings,
all of which are incorporated in Great Britain and whose operations are conducted mainly in the United Kingdom. The results for all of the
subsidiaries have been consolidated within these Financial Statements:

Name of subsidiary company

Lending Solutions Holdings Ltd

Lending Solutions Ltd

LSL-ONE Ltd

Energy-Assessors.com Ltd

Registered
office address

Holding

Direct

Indirect

Direct

Estate Agency and Related Services – Asset Management
LSL Corporate Client Services Ltd

Direct

St Trinity Ltd

Templeton LPA Ltd

Direct

Indirect

LSL Shareholder

LSL Property Services
plc

Lending Solutions
Holdings Ltd
LSL Property Services
plc
LSL Property Services
plc

LSL Property Services
plc
LSL Property Services
plc
First Complete Ltd

Estate Agency and Related Services – Residential Sales and Lettings
2
Appleton Estates & Property
Management Ltd
2
Bawtry Lettings and Sales Ltd
3
Beldhamland Ltd
Charterhouse Management (UK) Ltd 2
2
David Frost Estate Agents Ltd

Indirect
Indirect
Indirect
Indirect

Indirect

Davis Tate Ltd

your-move.co.uk Ltd
Marsh & Parsons Ltd
your-move.co.uk Ltd
Vitalhandy Enterprises
Ltd

100%
100%
100%
100%

Davis Tate Ltd

Indirect

LSLi Ltd

75.58%

EA Student Lettings Ltd
2
Eastside Property Developments Ltd 2
2
Elliott & Freeth Ltd
2
Fourlet (York) Ltd
2
Front Door Property Management
Ltd
GFEA Ltd

Guardian Property Lettings Ltd
Hawes & Co Ltd

2
2

2
Hawes & Co (Thames Ditton) Ltd
Headway Property Management Ltd 2
2
Holloways Residential Ltd
2
Home and Student Link Ltd

Indirect
Indirect
Indirect
Indirect
Indirect

Indirect

Indirect
Indirect

Indirect
Indirect
Indirect
Indirect

your-move.co.uk Ltd
your-move.co.uk Ltd
Davis Tate Ltd
Reeds Rains Ltd
ICIEA Ltd

LSLi Ltd

Reeds Rains Ltd
LSLi Ltd

100%
100%
100%
100%
100%

100%

100%
79%

Hawes & Co Ltd
Reeds Rains Ltd
your-move.co.uk Ltd
your-move.co.uk Ltd

100%
100%
100%
100%

Proportion of
nominal value of
Shares held

Nature of business

100%

Holding company

100%

Non trading

100%

Non trading

100%

Non Trading

100%

Asset Management

100%

Asset Management

100%

Asset Management

100%

Non Trading

Non Trading
Non Trading
Non Trading
Residential Sales and
Lettings

Residential Sales,
Lettings and Holding
Company
Non Trading
Non Trading
Residential Sales
Non Trading
Non Trading

Residential Sales and
Lettings and Holding
Company
Non Trading
Residential Sales,
Lettings and Holding
Company
Non Trading
Non Trading
Non Trading
Non Trading

135

34. Subsidiary and joint venture companies

Name of subsidiary company

Registered
office address

Homefast Property Services Ltd

2
2
2

2
2
2
2

2
1

3
2

2
1
2

2
4
2
2

2
1

ICIEA Ltd

Inter County Lettings Ltd
IQ Property (Hull) Ltd
JNP Estate Agents Ltd

JNP Estate Agents (Princes
Riseborough) Ltd
JNP (Residential Lettings) Ltd
JNP (Surveyors) Ltd
Kent Property Solutions Ltd
Lauristons Ltd

Lawlors Property Services Ltd

Lets Move Property Ltd
LSLi Ltd

Marsh & Parsons Ltd

Marsh & Parsons Holdings Ltd^^

Marshcroft Properties Ltd
New Daffodil Ltd

New Let Ltd
NSK Management Ltd^
Paul Graham Lettings &
Management Ltd
Philip Green Lettings Ltd
PHP Lettings Scotland Ltd
Prestons Lettings Ltd
Reeds Rains Ltd

Reeds Rains Cleckheaton Ltd
Thomas Morris Ltd

To Letting Ltd^

136

Holding

Indirect

Indirect
Indirect
Indirect

Indirect

Indirect
Indirect
Indirect
Indirect

Indirect

Indirect
Direct

Indirect

Direct

Indirect
Direct

Indirect
Indirect
Indirect

Indirect
Indirect
Indirect
Direct

Indirect
Indirect

Indirect

Proportion of
nominal value of
Shares held

Nature of business

77.5%

Non Trading

LSL Shareholder

Lending Solutions
Holdings Ltd
LSLi Ltd

ICIEA Ltd
Reeds Rains Ltd
LSLi Ltd

100%

100%
100%
100%

JNP Estate Agents Ltd 100%

JNP Estate Agents Ltd 100%
JNP Estate Agents Ltd 100%
100%
your-move.co.uk Ltd
100%
LSLi Ltd

LSLi Ltd

your-move.co.uk Ltd
LSL Property Services
plc

75%

100%
100%

Marsh & Parsons
(Holdings) Ltd

100%

LSL Property Services
plc
Marsh & Parsons Ltd
LSL Property Services
plc
your-move.co.uk Ltd
your-move.co.uk Ltd
GFEA Ltd

93.4%

100%
100%

100%
100%
100%

JNP Estate Agents Ltd 100%
100%
your-move.co.uk Ltd
100%
Reeds Rains Ltd
100%
LSL Property Services
plc

Reeds Rains Ltd
LSLi Ltd

100%
80%

your-move.co.uk Ltd

100%

Residential Sales,
Lettings and Holding
Company
Non Trading
Non Trading
Residential Sales,
Lettings and Holding
Company
Non Trading

Non Trading
Non Trading
Non Trading
Residential Sales,
Lettings and Holding
Company
Residential Sales and
Lettings
Non Trading
Residential Sales,
Lettings, Financial
Services and Holding
Company
Residential Sales,
Lettings and Holding
Company
Holding Company

Non Trading
Non Trading

Non Trading
Non Trading
Non Trading

Non Trading
Non Trading
Non Trading
Residential Sales,
Lettings, Financial
Services and Holding
Company
Non Trading
Residential Sales and
Lettings
Non Trading

34. Subsidiary and joint venture companies

Name of subsidiary company

Vanstons (Barnes) Ltd
Vanstons Commercial Ltd
Vanstons Lettings Ltd
Vanstons Ltd
Vitalhandy Enterprises Ltd
Warners Lettings Agency Ltd
Woollens of Wimbledon Ltd
Yates Lettings Ltd
your-move.co.uk Ltd

Zenith Properties Ltd

Registered
office address

3
3
3
3
2
2
2
2
1

Holding

Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect

LSL Shareholder

Marsh & Parsons Ltd
Marsh & Parsons Ltd
Marsh & Parsons Ltd
Marsh & Parsons Ltd
LSLi Ltd
ICIEA Ltd
Lauristons Ltd
Davis Tate Ltd
Lending Solutions
Holdings Ltd

Proportion of
nominal value of
Shares held

100%
100%
100%
100%
100%
100%
100%
100%
100%

Indirect

ICIEA Ltd

100%

Nature of business

Non Trading
Non Trading
Non Trading
Non Trading
Holding Company
Non Trading
Non Trading
Non Trading
Residential Sales,
Lettings, Financial
Services and Holding
Company
Non Trading

Estate Agency and Related Services – Financial Services
Advance Mortgage Funding Ltd

Direct

LSL Property Services
plc

100%

Financial Services

BDS Mortgage Group Ltd

First Complete Ltd

First2Protect Ltd
Group First Ltd
Insurance First Brokers Ltd
Linear Financial Services Ltd

Linear Financial Services Holdings
Ltd
Linear Mortgage Network Holdings
Ltd
Linear Mortgage Network Ltd

2
2
2
2

Mortgages First Ltd
2
Reeds Rains Financial Services Ltd 2

Surveying and Valuation Services
Albany Insurance Company
(Guernsey) Ltd
Barnwoods Ltd

Chancellors Associates Ltd
e.surv Ltd

Repartir Ltd

5
5

Indirect

Indirect
Indirect
Indirect
Indirect

Indirect

Indirect
Indirect

Direct

Indirect
Direct

Direct

Advance Mortgage
Funding Ltd
Lending Solutions
Holdings Ltd
your-move.co.uk Ltd
your-move.co.uk Ltd
Group First Ltd
Linear Financial Services
Holdings Ltd
First Complete Ltd

100%

100%
65%
100%
100%

100%

Financial Services

Financial Services and
Holding Company
Financial Services
Holding Company
Financial Services
Non Trading

Holding Company

First Complete Ltd

98%

Holding Company

Linear Mortgage
Network Holdings Ltd
Group First Ltd
Reeds Rains Ltd

100%

Financial Services

100%
100%

Financial Services
Financial Services

LSL Property Services
Ltd
LSL Property Services
plc
e.surv Ltd
LSL Property Services
Ltd
LSL Property Services
plc

100%

Captive insurer

100%

Non Trading

100%
100%

Chartered Surveyors
Chartered Surveyors

100%

Non Trading

137

34. Subsidiary and joint venture companies

Name of subsidiary company

Joint Ventures
9 Kensington Church Street
(Management) Ltd#

Cybele Solutions Holdings Ltd#

Cybele Solutions Ltd#

TM Group (UK) Ltd#

Registered office address:

Registered
office address

Holding

LSL Shareholder

Proportion of
nominal value of
Shares held

Nature of business

Indirect

Direct

Indirect

Direct

Marsh & Parsons
(Holdings) Ltd

50%

LSL Property Services
plc

50%

Cybele Solutions
Holdings Ltd

50%

LSL Property Services
plc

33.33%

Joint Venture – Residents
Property Company
Management

Joint Venture – Holding
Company
Joint Venture –
Conveyancing panel
manager
Joint Venture – Property
Searches

1. Newcastle House, Albany Court, Newcastle upon Tyne, NE4 7YB

2. 2nd Floor, Gateway 2, Holgate Park Drive, York, YO26 4GB

3. 80 Hammersmith Road, London, W14 8UD

4. 25 North Bridge Street, Bathgate, West Lothian, EH48 4PJ

5. Lahnstein House, Gold Street, Kettering, Northamptonshire, NN16 8AP

6. Unit 2 Guards Avenue, The Village, Caterham on The Hill, Surrey, CR3 5XL

7. Bickerton House, Lloyd Drive, Ellesmere Port, Cheshire, CH65 9HQ

8. Midland Bridge House, Midland Bridge Road, Bath, BA2 3FP

9. The Albany, South Esplanade, St Peters Port, Guernsey, GY1 4NF

^^. LSL holds 100% of the voting and economic rights in Marsh & Parsons Holdings Limited

# Joint Ventures

^ To Lettings Ltd was dissolved on 16th September 2016 and NSK Management Limited was dissolved on 31st January 2017 as part of a
Group simplification exercise.

138

Statement of Directors’ Responsibilities in Relation
to the Parent Company Financial Statements

The Directors are responsible for preparing the Annual Report and the Parent Company Financial Statements (together with the Annual
Report and Accounts) in accordance with applicable United Kingdom law and those International Financial Reporting Standards (IFRS) as
adopted by the EU.

Under company law the Directors must not approve the Company Financial Statements unless they are satisfied that they present fairly the
financial position of the Company and the financial performance and cash-flows of the Company for that period. In preparing the Company
Financial Statements, the Directors are required to:

• select suitable accounting policies in accordance with IAS 8 ‘Accounting Policies, Change in Accounting Estimates and Errors’ and then

apply them consistently;

• present information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable

information;

• provide additional disclosures when compliance with the specific requirements in IFRSs is insufficient to enable users to understand the

impact of particular transactions, other events and conditions on the Company’s financial position and financial performance;

• state that the Company has complied with IFRSs, subject to any material departures disclosed and explained in the Financial Statements;

and

• make judgements and accounting estimates that are reasonable and prudent.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions
and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the Financial
Statements comply with the Companies Act 2006 and Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets
of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

139

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsNote

2016
£’000

2015
£’000

2
3
4
5
9

7
8

8
9

10
11
11
11
11
12

8
181,908
–
7,235
105
189,256

9
181,133
27,097
7,233
8
215,480

62,700
251,956

59,510
274,990

(109,414)
(15,095)
(124,509)

(16,501)
–
(16,501)
(141,010)
110,946

208
5,629
4,303
(5,368)
–
106,174
110,946

(142,807)
(25,043)
(167,850)

(47,465)
(4,350)
(51,815)
(219,665)
55,325

208
5,629
3,564
(5,988)
19,640
32,272
55,325

Parent Company Balance Sheet

as at 31st December 2016

Non-current assets
Property, plant and equipment
Investment in subsidiaries
Financial assets
Investment in joint ventures
Deferred tax asset

Current assets
Trade and other receivables
Total assets

Current liabilities
Trade and other payables
Financial liabilities

Non-current liabilities
Financial liabilities
Deferred tax liability

Total liabilities
Net assets

Equity
Share capital
Share premium account
Share-based payment reserve
Shares held by the EBT (treasury shares)
Fair value reserve
Retained earnings
Total equity

The profit after tax for the year, attributable to the Company, was £87.0m (2015: loss of £3.6m).

The Financial Statements were approved by and signed on behalf of the Board by:

Ian Crabb
Group Chief Executive Officer
7th March 2017

Adam Castleton
Group Chief Financial Officer
7th March 2017

140

Parent Company Statement of Cash-Flows

for the year ended 31st December 2016

Operating activities
(Loss)/profit before tax
Non-cash adjustments to reconcile profit before tax to
net cash-flows
Exceptional gain on sale of financial assets
Fair value adjustment of contingent consideration
Finance income
Finance costs
Share-based payment transaction expense
Depreciation and impairment of property, plant and
equipment
Dividend income
Working capital adjustments:
(Increase) in trade and other receivables
(Decrease)/increase in trade and other payables

Interest paid
Income tax paid

Net cash flows from operating activities

Investing activities
Investment in joint venture
Investment in financial instruments
Proceeds from sale of financial instruments
Dividends received from joint venture
Dividends received from financial instruments
Dividends received from subsidiaries
Interest received
Purchase of property, plant and equipment and
intangible assets
Net cash flows from investing activities
Financing activities
Proceeds from borrowings
Repayment of overdraft
Proceeds from exercise of share options
Dividends paid to equity holders of the parent

Notes

£’000

2016
£’000

92,458

£’000

2015
£’000

(5,010)

6
7

(32,931)
(2,270)
–
1,998
501

2
(66,090)

(3,249)
(36,283)

(1,998)
(8,203)

(2)
–
35,991
–
778
65,598
–

–

(29,000)
(4,432)
48
(12,916)

(45,864)

(10,201)
(56,065)

(847)
(9)
1,941
(266)

23
(2,776)

(9,563)
28,573

(1,941)
(4,648)

–
(1,094)
297
1,499
549
–
9

12,066

(6,589)
5,477

102,365

1,261

11,500
(6,998)
1,314
(12,554)

Net cash flows used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at 1st January

Cash and cash equivalents at 31st December

(46,300)
–
–

–

(6,738)

–
–

–

141

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Parent Company Statement of Changes in Equity

for the year ended 31st December 2016

For the year ended 31st December 2016

As at 1st January 2016
Disposal of financial asset (net of tax)
Revaluation of financial asset (net of tax)
Other comprehensive income for the year
Profit for the year
Total comprehensive income for the year
Investment in treasury shares
Exercise of options
Share-based payment transactions
Dividends
As at 31st December 2016

Issued
capital
£’000

Share
premium
£’000

208
–
–
–
–
–
–
–
–
–
208

5,629
–
–
–
–
–
–
–
–
–
5,629

Share-
based
payment
reserve
£’000

3,564
–
–
–
–
–
–
(524)
1,263
–
4,303

Treasury
shares
£’000

(5,988)
–
–
–
–
–
–
620
–
–
(5,368)

Fair value
reserve
£’000

19,640
(27,078)
7,437
(19,640)
–
(19,640)
–
–
–
–
–

Retained
earnings
£’000

32,272
–
–
–
87,038
87,038
–
(218)
–
(12,916)
106,176

Total
£’000

55,325
(27,078)
7,437
(19,640)
87,038
67,398
–
(122)
1,263
(12,916)
110,948

For the year ended 31st December 2015

As at 1st January 2015
Disposal of financial asset (net of tax)
Revaluation of financial asset (net of tax)
Other comprehensive income for the year
Profit for the year
Total comprehensive income for the year
Investment in treasury shares
Exercise of options
Share-based payment transactions
Dividends
As at 31st December 2015

Issued
capital
£’000

Share
premium
£’000

208
–
–
–
–
–
–
–
–
–
208

5,629
–
–
–
–
–
–
–
–
–
5,629

Share–
based
payment
reserve
£’000

3,498
–
–
–
–
–
–
(805)
871
–
3,564

Treasury
shares
£’000

(7,922)
–
–
–
–
–
–
1,934
–
–
(5,988)

Fair value
reserve
£’000

15,477
(387)
4,550
4,163
–
4,163
–
–
–
–
19,640

Retained
earnings
£’000

48,213
–
–
–
(3,572)
(3,572)
–
185
–
(12,554)
32,272

Total
£’000

65,103
(387)
4,550
4,163
(3,572)
591
–
1,314
871
(12,554)
55,325

142

Notes to the Parent Company Financial Statements

for the year ended 31st December 2016

1. Accounting policies

Basis of preparation
The Financial Statements of the Company have been prepared in accordance with International Financial Reporting Standards (IFRS) as
issued by the International Accounting Standards Board (IASB).

The Company Financial Statements have been prepared on a going concern basis and on a historical cost basis, except for, available-for-
sale financial assets that have been measured at fair value.

The accounting policies which follow set out those significant policies which apply in preparing the Financial Statements for the year ended
31st December 2016. The Company’s Financial Statements are presented in sterling and all values are rounded to the nearest thousand
pounds (£’000) except when otherwise indicated.

Summary of significant accounting policies

Judgements and estimates
The preparation of financial information in conformity with IFRS as adopted by EU requires management to make judgements, estimates
and assumptions that affect the application of policies and reporting amounts of assets and liabilities, income and expenses. The estimates
and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the
circumstances, the results of which form the basis of making the judgements about carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results may differ from these estimates.

The key assumptions concerning the future and other key sources of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed
below:

Judgements
Areas of judgment that have the most significant effect on the amounts recognised in the consolidated financial statements are:

Valuation of financial assets
The Company owns minority interests in a number of listed and unlisted entities. In accordance with the accounting standards, these
investments are held at fair value and judgement and assumptions are required in assessing this.

Exceptional items
The Company recognises certain items as exceptional where, in the judgment of the Directors, they are required to be disclosed separately
due to them being material in size and unusual in nature. This is reviewed in accordance with IAS 1.

Deferred tax
The Company recognises deferred tax assets on all applicable temporary differences where it is probable that future taxable profits will be
available for utilisation. This requires management to make judgments and assumptions regarding the amount of deferred tax that can be
recognised based on the magnitude and likelihood of future taxable profits. Deferred tax liabilities are provided for in full.

Contingent consideration
The Company has acquired a number of businesses over the last few years. With regard to a number of these businesses, the Company
has a put and call option to buy, or require to buy, the remaining interest in these businesses at some point in the future. In accordance with
the accounting standards, estimates have been made with regard to the future profitability of these acquisitions and a provision for the cost
of acquiring these interests has been recognised.

Investments in subsidiaries
Investments are shown at cost less provision for impairment. The cost of an investment is measured as the aggregate of the consideration
transferred, measured at acquisition-date fair value. Any contingent consideration will be recognised at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration are recognised through profit and loss.

143

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports1. Accounting policies (continued)

Investments are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that its carrying value
may be impaired.

Investments in joint ventures
Investments in joint ventures are accounted for at cost less any provision for impairment. Investments are reviewed for impairment annually
or more frequently if events or changes in circumstances indicate that its carrying value may be impaired. The cost of an investment is
measured as the aggregate of the consideration transferred, measured at acquisition-date fair value. Any contingent consideration will be
recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognised in profit
and loss. Rebates received from investments in joint ventures which are earned by virtue of being a shareholder, will be recognised in the
period in which they are received, and are reported within the ‘income from joint ventures’ on the face of the Income Statement.

• where the temporary difference arises from the initial recognition of goodwill or of an asset or liability in a transaction that is not a business

combination that at the time of the transaction affects neither accounting nor taxable profit or loss;

• in respect of taxable temporary differences associated with investments in subsidiaries, where the timing of the reversal of the temporary

differences can be controlled and it is probable that the temporary differences will not reverse in the foreseeable future; and

• deferred income tax assets are recognised only to the extent that it is probable that taxable profit will be available against which the

deductible temporary differences, carried forward tax credits or tax losses can be utilised.

Deferred income tax assets and liabilities are offset, only if a legally enforceable right exists to set off current tax assets against current tax
liabilities, the deferred income taxes relate to the same taxation authority and that authority permits the Group to make a single net payment.
Income tax is charged or credited directly to other comprehensive income or equity, if it relates to items that are charged or credited in the
current or prior periods to other comprehensive income or equity respectively. Otherwise income tax is recognised in the Income Statement.

Pensions
The Company operates a defined contribution pension scheme for employees of the Company. The assets of the scheme are invested and
managed independently of the finances of the Company. The pension cost charge represents contributions payable in the year.

Share-based payment transactions

Equity-settled transactions
The Group equity share option programmes allow Company employees to acquire Shares. The fair value of the options granted is recognised
as an employee expense with a corresponding increase in equity in the case of equity-settled schemes. The fair value is measured at grant
date and spread over the period during which the employees become unconditionally entitled to the options. The fair value of the options
granted is measured using the Black-Scholes model, taking into account the terms and conditions (including market and non-vesting
conditions) upon which the options were granted. Non-market vesting conditions are taken into account by adjusting the number of equity
instruments expected to vest at each balance sheet date so that, ultimately, the cumulative amount recognised over the vesting period is
based on the number of options that eventually vest. No expense is recognised for awards that do not ultimately vest, except for equity-
settled transactions where vesting is conditional upon a market or non-vesting condition, which are treated as vesting irrespective of whether
or not the market or non-market vested condition is satisfied, provided that all other performance and/or service conditions are satisfied.

144

Notes to the Parent Company Financial Statements continued.for the year ended 31st December 20161. Accounting policies (continued)

Treasury shares
The Company has an employee share trust (ESOT) for the granting of Shares to Executive Directors and senior employees. Shares held by
the ESOT are treated as treasury shares and presented in the Balance Sheet as a deduction from equity. Dividends earned on Shares held
in the ESOT have been waived.

Financial instruments
Financial assets and financial liabilities are recognised in the Company’s Balance Sheet when the Company becomes a party to the
contractual provisions of the instrument. When financial assets are recognised initially, they are measured at fair value, being the transaction
price plus, in the case of financial assets not at fair value through profit or loss, directly attributable transaction costs. Financial assets
are derecognised when the Company no longer has the rights to cash-flows, the risks and rewards of ownership or control of the asset.
Financial liabilities are derecognised when the obligation under the liability is discharged, cancelled or expires.

The Company’s accounting policy for each category of financial instruments is as follows:

Office equipment, fixtures and fittings
Computer equipment
Leasehold improvements

–
–
–

over three to seven years
over three to four years
over the shorter of the lease term or ten years

An item of property, plant and equipment is derecognised upon disposal or when no future economic benefits are expected from its use or
disposal. Any gain or loss arising on de-recognition of the asset (calculated as the difference between the net disposal proceeds and the
carrying amount of the asset) is included in the Income Statement when the asset is derecognised. These assets’ residual values, useful
lives and methods of depreciation are reviewed at each financial year-end, and adjusted prospectively, if appropriate.

145

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports2. Property, plant and equipment

As at 31st December 2016

Cost
At 1st January 2016
Additions
At 31st December 2016

Depreciation
At 1st January 2016
Charge for the year
At 31st December 2016

Carrying amount
At 31st December 2016
At 1st January 2016

As at 31st December 2015

Cost
At 1st January 2015
Additions
At 31st December 2015

Depreciation
At 1st January 2015
Charge for the year
At 31st December 2015

Carrying amount
At 31st December 2015
At 1st January 2015

Leasehold
improvements
£’000

Fixtures, fittings
and computer
equipment
£’000

74
–
74

65
1
66

8
9

106
–
106

–
-

Leasehold
improvements
£’000

Fixtures, fittings
and computer
equipment
£’000

74
–
74

48
17
65

9
26

105
1
106

100
6
106

–
5

Total
£’000

180
–
180

171
1
172

8
9

Total
£’000

179
1
180

148
23
171

9
31

3. Investment in subsidiaries

Details of the subsidiaries held directly and indirectly by the Company are shown in Note 34 to the Group Financial Statements.

At 1st January
Additions
Adjustments for share-based payment
At 31st December

2016
£’000

181,133
13
762
181,908

2015
£’000

168,999
10,998
1,136
181,133

In 2016, an adjustment of £762,000 (2015: £1,136,000) was made on investment in subsidiaries for the share-based payment,
representing the financial effects of awards by the Company of options over its equity Shares to employees of subsidiary undertakings. The
total contribution to date is £7,129,000 (2015: £6,367,000).

146

Notes to the Parent Company Financial Statements continued.for the year ended 31st December 20164. Financial assets

At cost

At 1st January
Additions
Disposals
Revaluation uplift
At 31st December

2016
£’000

27,097
–
(36,082)
8,985
–

2015
£’000

21,343
1,094
(470)
5,130
27,097

Between 20th July 2016 and 31st October 2016, LSL sold its entire holding of 11.3m ordinary shares in Zoopla for total proceeds of £36.1m
at an average price per share of £3.19.

5. Investment in joint ventures

At cost

At 1st January
Additions
At 31st December

2016
£’000

7,233
2
7,235

2015
£’000

7,233
–
7,233

The Company has a 50% interest in LMS, a joint venture whose principal activity is to provide conveyancing panel management services.

In September 2016, the Company increased its ownership interest in LMS to 50.00% (FY15: 49.99%). The initial consideration for the
additional interest was £1,000, with a contingent consideration estimated at the date of acquisition of £1,000 (see Note 8).

6. Trade and other receivables

Group relief receivable
Prepayments
Amounts owed by Group undertakings

7. Trade and other payables

Accruals
Amounts owed to Group undertakings

8. Financial liabilities

Current
Deferred consideration
Contingent consideration
Bank overdraft

Non-current
Deferred consideration
Contingent consideration
Bank loans – revolving credit facility

2016
£’000

24,449
890
37,361
62,700

2016
£’000

1,087
108,327
109,414

2015
£’000

19,573
856
39,081
59,510

2015
£’000

1,720
141,087
142,807

2016
£’000

2015
£’000

–
–
15,095
15,095

–
1
16,500
16,501

2,422
3,093
19,528
25,043

447
1,518
45,500
47,465

147

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

8. Financial liabilities (continued)

Deferred consideration
Deferred consideration of £nil (2015: £447,000) relates to the Growth Shares acquired by the management of Marsh & Parsons since
November 2011. This is payable at any time between 31st March 2016 and 31st March 2020 at the option of management of Marsh &
Parsons. Deferred consideration of £2,422,000 relating to LMS acquisition from September 2014 relating to the purchase of an additional
stake in LMS was paid during the period.

Contingent consideration
£nil (2015: £1,518,000) of contingent consideration relates to the Growth Shares acquired by the management of Marsh & Parsons
subsequent to acquisition as an incentive to grow the Marsh & Parsons business. Holders of Growth Shares will have the option to require
LSL to buy their Growth Shares at any time between 1st January 2016 and 1st April 2020, at their discretion, at a price determined by a
multiple of EBITDA in the previous financial year. The payment of the consideration is contingent on the holder of the Growth Shares being
continuously employed by the relevant company and consequently the expected value of the Growth Shares is charged to the Income
Statement over the earn-out period.

During 2016, £2,825,000 of contingent consideration was paid to third parties in relation to the acquisition of LMS in September 2014.

The table below shows the allocation of the contingent consideration balance between the various categories:

Remuneration
Put options over non-controlling interests
Closing balance

Marsh & Parsons Growth Shares
LMS

Opening balance
Cash paid
Acquisition
Amounts recorded through Income Statement
Closing balance

2016
£’000

–
1
1

2016
£’000

–
1
1
4,611
(3,093)
1
(1,518)
1

2015
£’000

1,518
3,093
4,611

2015
£’000

1,518
3,093
4,611
5,458
–
–
(847)
4,611

Bank loans – revolving credit facility and overdraft
The Company’s bank loan totals £16.5m (2015: £45.5m) and the Company’s overdraft totals £15.1m (2015: £19.5m). The bank loan is
secured via a cross guarantee issued from all of the Group’s subsidiaries excluding the following subsidiaries: Lending Solutions, Homefast
Property Services, Financial Solutions (including Linear Mortgage Network), Templeton LPA, Pink Home Loans, Barnwoods, Chancellors
Associates and LSLi and its subsidiaries.

The bank loans relate to the revolving credit facility. The utilisation of this revolving credit facility may vary each month as long as this
does not exceed the maximum £100.0m facility (2015: £100.0m). The Company’s overdraft is also secured on the same facility and the
combined overdraft and revolving credit facility cannot exceed £100.0m (2015: £100.0m). The banking facility is repayable when funds
permit on or by May 2020.

The interest rate applicable to the facility is LIBOR plus a margin rate. The margin rate is linked to the leverage ratio of the Group and the
margin rate is reviewed at six monthly intervals.

148

Notes to the Parent Company Financial Statements continued.for the year ended 31st December 2016
9. Deferred tax

Deferred tax asset
Deferred tax asset at 1st January
Deferred tax credit/(charge) in profit and loss account for the year
Deferred tax asset at 31st December

Deferred tax liability
Deferred tax liability at 1st January
Deferred tax credit/(charge) in profit and loss account for the year
Deferred tax (charge)/credit to other comprehensive income
Deferred tax asset/(liability) at 31st December

2016
£’000

8
97
105

2016
£’000

(4,350)
23
4,327
–

2015
£’000

–
8
8

2015
£’000

(3,869)
(24)
(457)
(4,350)

A deferred tax asset is recognised in relation to timing differences on fixed assets of £7,000 and share-based payments of £98,000. At
2015 a deferred tax asset of £8,000 was recognised in relation to timing differences, and deferred tax liabilities of £4,326,000 and £24,000
were recognised in respect of held for sale assets and share-based payments.

The 2015 Summer Budget announced that the headline rate of corporation tax in the UK would be further reduced from the current rate of
20% to 19% effective from 1st April 2017, and further reduced to 18%, effective from 1st April 2020. The Budget of March 2016 announced
that from 1st April 2020, the proposed corporation tax will be lowered further still to 17%.

Following the substantive enactment of the Finance Bill 2016 in September 2016, the corporation tax rate of 17% has been confirmed.
Accordingly this is the rate at which deferred tax has been provided (2015: 18%). Corporation tax is recognised at the headline UK effective
rate of 20% (2015: 20.25%)

10. Called up share capital

Authorised:
Ordinary Shares of 0.2p each

Issued and fully paid:
At 1st January and 31st December

11. Reserves

2016

2015

£’000

500,000,000

1,000 500,000,000

1,000

104,158,950

208 104,158,950

208

For a description of the reserves refer to Note 26 to the Group Financial Statements.

Share premium
The amount subscribed for share capital in excess of nominal value less any costs attributable to the issue of new Shares.

Share-based payment reserve
This represents the amount provided in the year in respect of share awards. The Company has operated long-term incentive plans
(including JSOP and CSOP) and a number of SAYE schemes for the employees in the Group. See Note 13 to the Group Financial
Statements for details of the LTIP, JSOP, CSOP, SIP/BAYE and the SAYE schemes. The effect of share-based payment transactions on
the Company’s profit for the period was a charge of £501,000 (2015: credit of £266,000).

Fair value reserve
The fair value reserve is used to record the changes in fair value of financial assets held for sale.

149

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

12. Company profit/loss for the financial year after tax

The Company has not presented its own profit and loss account as permitted by Section 408 of the Companies Act 2006. The profit after
tax for the year was £87.0m (2015: loss of £3.6m).

Remuneration paid to Directors of the Company is disclosed in Note 13 to the Group Financial Statements.

The Company paid £212,819 (2015: £243,733) to its auditors in respect of the audit of the Financial Statements of the Company.

Fees paid to the external auditors and their associates for non-audit services to the Company itself are not disclosed in the individual
accounts of the Company because Group Financial Statements are prepared which are required to disclose such fees on a consolidated
basis. These are disclosed in Note 10 to the Group Financial Statements.

13. Pensions costs and commitments

Total contributions to the defined contribution schemes in the year were £47,128 (2015: £40,787). There were £nil outstanding amounts in
respect of pensions as at 31st December 2016 (2015: £nil).

The Parent Company headcount at 31st December 2016 was nil (2015: nil). This is due to employment contracts being drawn up within the
subsidiaries and not within the Parent Company itself.

14. Capital commitments

The Company had no capital commitments as at 31st December 2016 (2015: none).

15. Related party transactions

During the year the transactions entered into by the Company are as follows:

Wholly owned subsidiaries
2016
2015

Sales to
related
parties
£’000

Purchases from
related
parties
£’000

Amounts owed
by related
parties
£’000

Amounts owed
to related
parties
£’000

–
–

22,969
23,175

108,323
131,087

Sales to
related
parties
£’000

Purchases from
related
parties
£’000

Amounts owed
by related
parties
£’000

Amounts owed
to related
parties
£’000

–
–

14,392
15,906

–
10,000

16. Financial instruments – risk management

The Company’s principal financial instruments comprise bank loans and other loans. The main purpose of these financial instruments is to
raise finance for the Company’s operations and to fund acquisitions. The Company has various financial assets and liabilities such as trade
receivables, cash and short-term deposits and trade payables, which arise directly from its operations.

It is the Company’s policy that trading in derivatives shall not be undertaken. The Group may, from time to time and as necessary, enter into
interest rate swaps for risk management purposes but did not hold any such swaps during either the current or prior year.

The Company is exposed through its operations to the following financial risks:

• cash-flow interest rate risk;

• liquidity risk; and

• credit risk.

Policy for managing these risks is set up by the Board following recommendations from the Group Chief Financial Officer. The policy for
each of the above risks is described in more detail opposite.

150

Notes to the Parent Company Financial Statements continued.for the year ended 31st December 2016

16. Financial instruments – risk management (continued)

Cash-flow interest rate risk
The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s long-term debt obligations with
floating interest rates.

The majority of external Company borrowings are variable interest based and this policy is managed centrally.

2016

2015

Increase/
decrease

in basis point

Effect on profit
before tax
£’000

+100
-100
+100
-100

(165)
165
(455)
455

Liquidity risk
The Company aims to mitigate liquidity risk by managing cash generation by its operations, dividend policy and acquisition strategy.
Acquisitions are carefully selected with authorisation limits operating up to Group Board level and cash payback periods applied as part of
the investment appraisal process.

The Company monitors its risk to a shortage of funds using a recurring liquidity planning tool and daily cash-flow reporting. This includes
consideration of the maturity of both its financial investments and financial assets (e.g. accounts receivable, and other financial assets) and
projected cash-flows from operations. The Company’s objective is to maintain a balance between continuity of funding and flexibility for
potential acquisitions through the use of its banking facilities.

The table below summarises the maturity profile of the Company’s financial liabilities at 31st December 2016 based on contractual
undiscounted payments:

Year ended 31st December 2016

Interest bearing loans and borrowings
(including overdraft)
Trade payables
Contingent consideration
Deferred consideration

Year ended 31st December 2015

Interest bearing loans and borrowings
(including overdraft)
Trade payables
Contingent consideration
Deferred consideration

On demand
£’000

15,095
–
–
–
15,095

On demand
£’000

19,528
–
–
–
19,528

Less than
3 months
£’000

129
108,327
–
–
108,456

Less than
3 months
£’000

333
141,088
–
–
141,421

3 to 12
months
£’000

395
–
–
–
395

3 to 12
months
£’000

1,018
–
3,093
2,422
6,533

1 to 5
years
£’000

17,766
–
1
–
17,767

1 to 5
years
£’000

46,403
–
1,536
575
48,514

> 5
years
£’000

–
–
–
–
–

> 5
years
£’000

–
–
–
–
–

Total
£’000

33,385
108,327
1
–
141,713

Total
£’000

67,282
141,088
4,629
2,997
215,996

151

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

16. Financial instruments – risk management (continued)

The liquidity risk of the Company entity is managed centrally by the Group Treasury function. The Company’s cash requirement is
monitored closely. The Company has a revolving credit facility with a syndicate of major banking corporations to manage longer term
borrowing requirements.

Capital management
The primary objective of the Company’s capital management is to ensure that it maintains appropriate capital structure to support its
business objectives, including any regulatory requirements, and maximise Shareholder value. Capital includes share capital and other equity
attributable to the equity holders of the parent.

In the medium to long-term, the Company will strive to maintain a reasonable leverage (i.e. balance between debt and equity) to help
achieve the Company’s business objectives of growth (through acquisitions and organic growth) and dividend policy. In the short-term,
the Company does not have a set leverage ratio to be achieved but the Directors monitor the ratio of Net Bank Debt to operating profit to
ensure that the debt funding is not excessively high.

Credit risk
There are no significant concentrations of credit risk within the Company.

Interest rate risk profile of financial assets and liabilities
Treasury policy is described in the Note 15. The disclosures below exclude short-term receivables and payables which are primarily of a
trading nature and expected to be settled within normal commercial terms.

The interest rate profile of the financial assets and liabilities of the Group as at 31st December 2016 are as follows:

Fixed rate
Revolving credit facility
Floating rate
Revolving credit facility

Within 1 year
£’000

1-2 years
£’000

2-3 years
£’000

3-4 years
£’000

–

(31,595)

–

Total
£’000

–

(31,595)

The effective interest rate and the actual interest rate charged on the loans in 2016 are as follows:

Revolving credit facility

Effective rate

Actual rate

3.7%

1.3%

The effective interest rate on the revolving credit facility during the year is higher than the actual rate due to commitment fees payable on
undrawn amounts.

The interest rate profile of the financial assets and liabilities of the Group as at 31st December 2015 are as follows:

Fixed rate
Revolving credit facility
Floating rate
Revolving credit facility

Within 1 year
£’000

1-2 years
£’000

2-3 years
£’000

3-4 years
£’000

–

(65,028)

Total
£’000

–

(65,028)

The effective interest rate and the actual interest rate charged on the loans in 2015 are as follows:

Revolving credit facility

Effective rate

Actual rate

3.2%

The effective interest rate on the revolving credit facility during the year was high due to commitment fees payable on undrawn amounts
earlier in the year.

152

Notes to the Parent Company Financial Statements continued.for the year ended 31st December 2016

16. Financial instruments – risk management (continued)

Fair values of financial assets and financial liabilities
The fair values for the majority of the financial instruments have been calculated by discounting the expected future cash-flows at interest
rates prevailing for a comparable maturity period for each instrument. There are no material differences between the book value and fair
value for any of the Company’s financial instruments.

Fair value hierarchy
The Group uses the following hierarchy for determining and disclosing the fair value of the financial instruments by valuation technique:

•

Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities;

•

Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or
indirectly; and

Level 3: techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market
data.

The following table provides the fair value measurement hierarchy of the Group’s assets and liabilities.

£’000

Level 1
£’000

Level 2
£’000

Level 3
£’000

2016

Assets measured at fair value
Financial assets

Liabilities measured at fair value
Contingent consideration
Deferred consideration

Liabilities for which fair values are disclosed
Interest-bearing loans and borrowings:
Floating rate borrowings

2015

Assets measured at fair value
Financial assets

Liabilities measured at fair value
Contingent consideration
Deferred consideration

Liabilities for which fair values are disclosed
Interest-bearing loans and borrowings:
Floating rate borrowings

–

1
–

31,595

–

–
–

–

–
–

31,595

£’000

Level 1
£’000

Level 2
£’000

–

–
–

27,097

4,611
2,869

65,028

–
–

–

1
–

–

Level 3
£’000

–

4,611
2,869

65,028

–

During the period, the Company sold its entire holding of 11.3m ordinary shares in Zoopla. Previously, the holding was valued on the stake
held and the share price date at the end of the period, which qualifies as a Level 1 technique.

Fair values of the Company’s interest-bearing borrowings and loans are determined by using discounted cash-flow (DCF) methodology
using a discount rate that reflects the issuer’s borrowing rate as at the end of the reporting period. The own non-performance risk as at
31st December 2016 was assessed to be insignificant.

153

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance Reports

Other Information

In this section
155 Definitions
159 Shareholder Information

Embrace Mortgage Services – website home page.

154

Definitions

“2011 EBT” employee benefit trust established in November 2011 as part of the acquisition of Marsh & Parsons.

“Adjusted Basic Earnings Per Share” or “Adjusted Basic EPS” is defined at Note 11 to the Group Financial Statements.

“AGM” Annual General Meeting.

“Advance Mortgage Funding” trading name of Advance Mortgage Funding Limited.

“Albany” refers to Albany Insurance Company (Guernsey) Ltd.

“AMI” Association of Mortgage Intermediaries.

“ARLA” Association of Residential Lettings Agents.

“ASA” Advertising Standards Authority.

“Asset Management” refers to LSL’s repossessions asset management and property management for multi-property landlords’ services.

“Audit Committee” LSL’s Audit Committee.

“Auditor Independence Policy” LSL policy relating to non-audit services provided by the external auditor.

“Basic Earnings Per Share” or “EPS” is defined at Note 11 to the Group Financial Statements.

“Board” the board of Directors of LSL.

“BAYE” ‘buy as you earn’ (also referred to as SIP).

“BDS” BDS Mortgage Group Ltd.

“CMA” Competition and Markets Authority.

“Committees” refers to LSL’s Nominations Committee, the Audit Committee and the Remuneration Committee.

O
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“Company” and “Parent Company” refers to LSL Property Services plc.

“Companies Act” Companies Act 2006.

“Chancellors Associates” trading name of Chancellors Associates Limited.

“Chairman” Simon Embley.

“Chairman of the Audit Committee” since the 2016 AGM, David Stewart.

“Chairman of the Remuneration Committee” Bill Shannon.

“CML” Council of Mortgage Lenders.

“Code” UK Code of Corporate Governance published by the Financial Reporting Council (FRC) (September 2014 edition).

“Company Secretary” Sapna B FitzGerald.

“CCAS” Consumer Codes Approval Scheme.

“CSOP” company share ownership plan.

“CSR” corporate social responsibility.

“Davis Tate” trading name of Davis Tate Limited.

“Deputy Chairman” refers to Bill Shannon.

“Director” an Executive Director or Non Executive Director of LSL.

“DMGT” trading name of Daily Mail and General Trust plc.

“EBITDA” earnings, before interest, taxes, depreciation and amortisation.

“Embrace Mortgage Services” trading name of LSLi.

“EPC” energy performance certificate.

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155

Definitions continued.

“EPS” earnings per share.

“Ernst & Young” Ernst & Young LLP.

“ESG” environmental, social and governance.

“ESOS” energy savings opportunity scheme.

“ESOT” LSL’s employee share trust.

“Estate Agency Division” or “Estate Agency” includes LSL’s Residential Sales, Lettings, Financial Services, LPA fixed charge receiver
and Asset Management businesses.

“Estate Agency and Related Services” refers to LSL’s Estate Agency Division.

“e.surv” or “e.surv Chartered Surveyors” trading names of e.surv Limited.

“Executive Committee” refers to the Executive Committee of the Group, which includes the Executive Directors.

“Executive Director(s)” refers to Ian Crabb, Adam Castleton and Helen Buck (with effect 2nd February 2017). Adrian Gill was also an
Executive Director during 2016.

“EU” European Union.

“FCA” Financial Conduct Authority.

“Financial Services” refers to LSL’s financial services (including mortgage, general insurance and pure protection brokerage services and
the operation of LSL’s intermediary networks).

“First Complete” trading name of First Complete Limited.

“Financial Statements” financial statements contained in this Report.

“FRC” Financial Reporting Council.

“Frosts” trading name of David Frost Estate Agents Limited.

“FSMA” Financial Services and Markets Act 2000.

“Group First” or “GFL” Group First Limited.

“Group” LSL Property Services plc and its subsidiaries.

“Group Chief Executive Officer” Ian Crabb.

“Group Chief Financial Officer” Adam Castleton.

“Growth Shares” the B and C classes of ordinary shares (each £0.001) in Marsh & Parsons (Holdings) Limited.

“Goodfellows” trading name of GFEA Limited.

“Guild of Professional Estate Agents” or “GPEA” trading name of Guild of Professional Estate Agents Limited.

“Hawes” or “Hawes & Co” trading name of Hawes and Co Limited.

“HMRC” Her Majesty’s Revenue and Customs.

“Homefast” Homefast Property Services Limited.

“Home of Choice” or “HoC” division within First Complete.

“Home Report” a report which includes a single survey, energy report and property questionnaire and which must accompany all
residential property marketing in Scotland.

“IBNR” incurred but not reported.

“IFRS” International Financial Reporting Standards.

“Intercounty” trading name of ICIEA Limited.

“Insurance First Brokers” Insurance First Brokers Ltd.

156

“IPO” initial public offering.

“JNP” trading name of JNP Estate Agents Limited.

“JSOP” joint share ownership plan.

“KPI” key performance indicators.

“Land & New Homes” trading style used by members of the Estate Agency Division.

“Lauristons” trading name of Lauristons Limited.

“Lawlors” trading name of Lawlors Property Services Limited.

“Legal Marketing Services” and “LMS” and “LMS Direct Conveyancing” and “Cybele” all refer to LMS Direct Conveyancing Limited
and Cybele Solutions Holdings Limited.

“Lending Solutions” Lending Solutions Holdings Limited.

“Lettings” refers to LSL’s residential property lettings and property management services.

“Lexis Nexis” part of the RELX Group plc.

“Linear” and “Linear Financial Solutions” are trading names of Linear Mortgage Network Limited.

“Lloyds Banking Group” Lloyd Bank plc group of companies.

“LPA” the Law of Property Act 1925.

“LSLi” LSLi Limited and its subsidiaries (during 2016 these included JNP, Intercounty, Frosts, Goodfellows, Davis Tate, Lauristons, Lawlors,
Hawes & Co and Thomas Morris).

“LSL”, “Group” and “Parent Company” refers to LSL Property Services plc and its subsidiaries.

“LSL Corporate Client Department” trading name of LSL Corporate Client Services Limited.

“LTIP” long-term incentive plan.

“Management Team” senior management teams within the Group including the Executive Directors.

“Marsh & Parsons” trading name of Marsh & Parsons Limited.

“Mortgages First” Mortgages First Ltd.

“NAEA” National Association of Estate Agents.

“NBS” or “New Bridge Street” trading name of Aon Hewitt Limited.

“Net Bank Debt” see Note 31 to the Group Financial Statements.

“NFoPP” National Federation of Property Professionals.

“Non Executive Director” refers to Kumsal Bayazit Besson, Bill Shannon, David Stewart and Simon Embley. During 2016, Helen Buck
was also a Non Executive Director.

“Notice of Meeting” the circular made available to Shareholders setting out details of the AGM.

“Note” refers to Notes to the Financial Statements.

“OCI” refers to other comprehensive income.

“OFT” Office of Fair Trading.

“Openwork” trading name of Openwork Limited.

“Ordinary Shares” or “Shares” 0.2p ordinary shares in LSL.

“Palmer and Harvey” trading name of Palmer and Harvey McLane Limited.

“PI” professional indemnity.

157

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsDefinitions continued.

“PI Costs” costs relating to ongoing and expected future PI claims relating to Surveying and Valuation Services.

“PDMRs” Persons Discharging Managerial Responsibility as defined in Article 3(1)(25) of the Market Abuse Regulation (MAR).

“Pink Home Loans” or “Pink” are trading names for Advance Mortgage Funding Limited and BDS Mortgage Group Limited.

“RCF” revolving credit facility.

“Reeds Exhibitions” part of the RELX Group plc.

“Reeds Rains” trading name of Reeds Rains Limited.

“Reeds Rains Financial Services” trading name of Reeds Rains Financial Services Limited.

“Registered Office” Newcastle House, Albany Court, Newcastle Business Park, NE4 7YB.

“Report” LSL’s Annual Report and Accounts 2016.

“Residential Sales” refers to LSL’s services for residential property sales.

“RICS” Royal Institution of Chartered Surveyors.

“Sainsbury’s” Sainsbury’s Supermarkets Limited.

“SAYE” save-as-you-earn.

“Senior Independent Non Executive Director” refers to Bill Shannon.

“Shareholders” shareholders of LSL.

“SIP” share incentive plan (also referred to as BAYE).

“St Trinity Asset Management” trading name of St Trinity Limited.

“Surveying Division” or “Surveying” includes LSL’s Surveying and Valuation Services businesses.

“Surveying and Valuation Services” or “Surveying Services” refers to LSL’s Surveying Division.

“Templeton” trading name of Templeton LPA Limited.

“Thomas Morris” trading name of Thomas Morris Limited.

“The Mortgage Alliance” or “TMA” are trading names of First Complete’s mortgage club.

“TM Group” TM Group Limited.

“TPO” The Property Ombudsman.

“Trust” or “Employee Benefit Trust” or “ESOT” LSL Property Services plc Employee Benefit Trust.

“Trustees” Capita Trustee Limited.

“TSI” Trading Standards Institute.

“TSR” total shareholder return.

“Underlying Operating Margin” operating profit before exceptional costs, contingent consideration, amortisation and share-based
payments shown as a percentage of turnover.

“Underlying Operating Profit/Loss” before exceptional costs, contingent consideration, amortisation of intangible assets and share-based
payments.

“VEM” Vibrant Energy Matters Limited.

“Walker Fraser Steele” a trading name and division of e.surv.

“Your Move” trading name of your-move.co.uk Limited.

“Zoopla” trading name of Zoopla Property Group plc.

158

Shareholder Information

Company details
LSL Property Services plc
Registered in England (Company Number 5114014)
LEI Number 213800T4VM5VR3C7S706

Registered office
Newcastle House, Albany Court, Newcastle Business Park, Newcastle Upon Tyne, NE4 7YB

Head office
1 - 3 Sun Street, London, EC2A 2EP
Telephone: 0203 215 1015
Facsimile: 0207 920 9443
Email: enquiries@lslps.co.uk
Website: www.lslps.co.uk

Share listing
LSL Property Services plc 0.2p Ordinary Shares are listed on the London Stock Exchange under ISIN GB00BIG5HX72

Registrar
Capita Asset Services
The Registry
34 Beckenham Road
Beckenham, Kent
BR3 4TU
Telephone: 0871 664 0300

Calls cost 12p per minute plus your phone company’s access charge. Calls outside the UK will be charged at the applicable international
rate. Lines are open between 9.00 am to 5.30 pm, Monday to Friday excluding public holidays in England and Wales.
Website: www.capitaassetservices.com
Email: shareholderenquiries@capita.co.uk

If you move, please do not forget to let the registrar know your new address.

Provisional calendar of events
Preliminary results released
AGM proxy form deadline
AGM

7th March 2017
4.00 pm 25th April 2017
4.00 pm 27th April 2017

The AGM will be held at LSL’s offices at 1-3 Sun Street, London, EC2A 2EP. The Notice of Meeting details the proposed resolutions.

In accordance with its Articles of Association, LSL publishes Shareholder information, including notice of AGMs and the Annual Report and
Accounts on its website, www.lslps.co.uk. Reducing the number of communications sent by post not only results in cost savings to LSL, it
also reduces the impact that unnecessary printing and distribution of reports has on the environment.

LSL’s Articles of Association enable all communications between Shareholders and LSL to be made in electronic form (as permitted by the
Companies Act 2006). Documents will be supplied via LSL’s website to Shareholders who have not requested a hard copy, or provided an
email address to which documents of information may be sent. Where a Shareholder has consented to receive information via the website,
a letter will be sent to the Shareholder on release of any information directing them to the website.

If a Shareholder wishes to continue to receive hard copy documents they should contact Capita Registrars (details above).

www.lslps.co.uk
Registered in England (Company Number 5114014)

Registered office
Newcastle House, Albany Court
Newcastle Business Park, Newcastle upon Tyne, NE4 7YB
Telephone: 0203 215 1015
Facsimilie: 0207 920 9443
Email: enquiries@lslps.co.uk

159

Other InformationFinancial Statements Strategic Report OverviewDirectors’ Report and Corporate Governance ReportsShareholder Notes

160

LSL Property Services plc

Annual Report and Accounts Year ended 31st December 2016

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